Plot sold by money received on 20 Dec 15, registry pending

As the property sold is a plot, you will be entitled to exemption u/s 54F only for the investment in new residential house, provided you don't own any other residential house.As you are already having another residential house, you will not be able to claim exemption u/s 54F. The only scope for you is to invest the amount of Long Term Capital Gains (LTCG) in capital gains bonds u/s 54EC and units u/s 54EE to the extent of Rs 50 Lakhs each.

As there is stay in the high court for the registration, you cannot transfer the title in the property to the buyer, as the high court may not allow the registration in its final verdict. Hence, your LTCG will be assessable, prima facie, only in the year in which the stay is lifted and the registration is allowed to be done, even if you have received full amount of consideration and handed over the possession. However, the nature of your court case and stay are important to ascertain the facts of your case for the determination of the date of transfer.

What are the reasons for staying the registration of plots in a whole colony? If the dispute affects your eligibility to hold the plot itself, then you cannot pass on any title to the buyer. What if the High Court decides the case against you? The facts of the case need to be determined with reference to your eligibility to hold valid legal and transferable title. If you are not able to transfer the legal title, then the whole sale transaction will fail.

Only when the transfer is complete, the LTCG can be determined and accordingly the exemption can be claimed by investing your LTCG in the capital gains bonds u/s 54EC /eligible units u/s 54EE, with a lock in period of 3 years.

Assuming that you have a valid title that can be passed on to your buyer, the transfer takes place only upon registration of the sale deed. However, as you have already received the sale consideration and the possession is also handed over to the buyer, you can still execute a sale deed and register it as and when it can be done, by referring to the stay and passing on the burden of proof of title to the buyer, in consultation with a lawyer. In such a case, the beneficial ownership of the property is irrevocably passed on to the buyer, though the sale deed is not registered. The LTCG then arises and you can invest the LTCG in capital gains bonds u/s 54EC/eligible units u/s 54EE with a lock in period of 3 years.

The actual tax liability and exemptions can be worked out on perusal of the documents executed / being executed.

Hello,

The transaction has to be squared off within 2 years from the date of sale in case it is a already constructed property. Incase it is under construction, then you have 3 years from the date of sale.

Trust this clarifies your query.

Feel free to call / get back in case of further clarifications.

Thanking You.

Regards,

Rohit R Sharma

BCOM, FCA, LLB, CERT. FAFP

Hi,

The time limit for investing in another residential house property is two years from the date of sale in case of ready property and three years in case of underconstruction property.

Please feel free to call/ revert in case you need more clarity.

Thanks and regards

Abhishek Dugar

CA CS B.Com

Hi

It is very important to know the following before deciding the time limit for investment-

1. Had you received full payment in Dec 15?

2. Had you transferred the possession of the property to the buyer?

Please let me know the above for correct and apt answers.

In that case, your period of 2 years for purchase of new property to claim exemption was till Dec 17 only.

However, if you want to construct a new property, then time limit is till Dec 18. You can buy a flat and get considerable construction done in order to claim the exemption OR you can buy an under construction flat whose construction shall be completed before Dec 18.

As I mentioned earlier, you can execute a sale deed. Now in the sale deed mention clearly the date of handing over possession and receipt of money in December 2015 and the reasons for non-registration. You can choose the actual date of transfer, the date of handing over possession or the date of registration by clearing indicating your intentions and terms in the sale deed.

Hi,

Since you had received the sale consideration in 2015 and gave possession as well, the Tax Department can allege that the transaction was completed then and you should have purchased a new property within 2 years (in case of fully constructed property) or 3 years (in case of under constructed property).

Assuming you do invest now, you can claim exemption of the purchase of a residential house, since you own only one other residential property.

Trust this clarifies.

Regards,

Keerthiga Padmanabhan

M.Com., CA, LL.B