• Selling a builder Flat before builder getting OC

I was given a letter of (technical) possession for a builder flat in 2014 which was booked in 2009 with a duly signed Buyers' Agreement. The builder is yet to obtain Occupation Certificate from the Authorities, as the work in some of the blocks in the Project is still going on.  Now if I sell the flat, will the capital gain be Long Term or Short Term? In other words, will the technical possession be termed as THE PROPER POSSESSION, becoz if that be so then I will perhaps be required to hold it for 3 yrs from 2014 to qualify for LTCG? What should I do to take benefit of LTCG?
Asked 1 year ago in Property Law from Kolkata, West Bengal
Religion: Hindu
1)  profit from the sale of a property is taxed under Short-Term Capital Gains when the resale of the property has been done in less than 3 years from the date of the original purchase of the property.

2) Date of purchase of the house for the purpose of claim-ing deduction u/s.54 would be the date on which the assessee takes possession of the house and not the date of registration of the sale deed. CIT v. R. L. Sood, (2000) 245 ITR 727 (Del.)

3)  IT v. Shahzada Begum, (1988) 173 ITR 397 (AP); held date of taking possession of property is material and not the date of registration of sale deed for computing prescribed time limit

4) you would be required to hold the property for period of 3 years from date of taking possession to claim benefit of long term capital gains 
Ajay Sethi
Advocate, Mumbai
23153 Answers
1216 Consultations
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The property now intended to be  sold by you  shall be a long term capital gains because you took possession in the year 2014 itself.   Grant of occupation certificate is immaterial in this aspect. 
T Kalaiselvan
Advocate, Vellore
13948 Answers
127 Consultations
5.0 on 5.0
1. Yes, it is as good as actual possession.
2. To save CGT you better cOnsult with a CA.
Devajyoti Barman
Advocate, Kolkata
5181 Answers
54 Consultations
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The capital gain arising to the assessee would be long-term capital gain taking into consideration the date of allotment and not the delivery of the possession. The date of possession is immaterial. On the basis of date of allotment you can ascertain as to whether the gain will be long term or short term. 
Ashish Davessar
Advocate, Jaipur
18070 Answers
447 Consultations
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1) the date of acquisition of the rights would depend upon facts of each case and the documents executed  by the builder  to the intended buyers. 

2) In case of initial advance if there is no  allotment by the developer, same may not amount of acquisition of rights in the property. Property rights may generally be acquired by the intended buyer only when an allotment letter specifying the project etc. has been issued. - 

3) In case the intended buyer transfer his rights in the property during the period when construction is in progress and he has not obtained possession of the property, the right of the buyer would be in the nature of capital assets and accordingly, gain arising on such transfer would be in the nature of long term or short terms gain depending upon the period of holding. -



4)In case you sell a property booked by you before you take the possession, the taxability of profits made on such sale will depend on the time interval between your date of booking the property and the date of agreement to transfer your right in the under construction property 

Ajay Sethi
Advocate, Mumbai
23153 Answers
1216 Consultations
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1. Neither do we have the time to search case laws for you nor case laws are required. They have only an academic value as nobody asks for case laws. When the competent authority has to pass an order it will pass it even if it is made cognizant of the case law, whereupon you can take recourse to the corrective remedies before the courts. So do not bother about it.

2. Your tax liability has to be computed from July 2009.
Ashish Davessar
Advocate, Jaipur
18070 Answers
447 Consultations
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Long term Capital gains, if the assets like shares and securities, are held by the assessee for a period exceeding 12 months or 36 months in the case of other assets.
Long term Capital gains are computed by deducting from the full value of consideration for the transfer of a capital asset the following :
- Expenditure connected exclusively with the transfer;
- The indexed cost of acquisition of the asset, and
- The indexed cost of improvement, if any, of that asset. 
 In case the asset transferred is a long term capital asset being a residential house, and if out of the capital gains, a new residential house is constructed within 3 years, or purchased 1 year before or 2 years after the date of transfer, then exemption on the LTCG is available on the amount of investment in the new asset to the extent of the capital gains. It may be noted that the amount of capital gains not appropriated towards purchase or construction may be deposited in the Capital Gains Account Scheme of a public sector bank before the due date of filing of Income Tax Return. This amount should subsequently be used for purchase or construction of a new house within 3 years.
profits or gains arising from the transfer of a capital asset made in a previous year is taxable as capital gains under the head “Capital Gains”. The important ingredients for capital gains are, therefore, existence of a capital asset, transfer of such capital asset and profits or gains that arise from such transfer.
T Kalaiselvan
Advocate, Vellore
13948 Answers
127 Consultations
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1. Capital gain is derived out of invested capital,

2. If you have made the full and final payment in the year 2009, and sold the flat in the year 2015, then certainly you have made LT capital gain irrespective of the fact when you got the possesion of he flat or got the sale deed registered.
Krishna Kishore Ganguly
Advocate, Kolkata
12084 Answers
228 Consultations
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1. There is no case law which states that capital gain for selling a flat shall be calculated from the date of taking possession of the flat or registering the title for the same,

2. This argument is enough in support of your claim for LT Capital Gain.
Krishna Kishore Ganguly
Advocate, Kolkata
12084 Answers
228 Consultations
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