Query 1]

I have a query. Kindly provide me your opinion. I had purchased a property from a builder. I had made part/full payment to the builder. But due to some reasons I did not register the property. Now I wish to sell the property. The purchaser would make me the payment and the builder would come for the registration to register the property directly in favor of new buyer. I want to know whether the profit arising from the transaction would be considered as Capital Gain or as Income from Other Source? Kindly elaborate with section under the Income Tax Act.  [Rahul Agarwal- keepwalkingalways@]


It appears that you have purchased the flat and the possession of the flat was handed over to you by the builder. Due to some technical or procedural lapses, the sale deed appears to have not been executed in your favor. Since the property is not recorded in your name, sale deed could not be executed by you and the same has to be done by the original owner i.e., the builder. If it is so, the income arising to you out of the above transactions would be taxable as “Income from Capital Gain” as you are transferring the RIGHTS in the capital assets in favor of the buyers even though the sale deed is executed directly by the builder. It may further be noted that “Extinguishment of any rights in the capital assets” is chargeable to tax as “Capital gain” income u/s 45 read with section 2(47)(ii) & 2(14).

Query 2]

Is it mandatory for audit assessees to file A.Y. 2011-12 ITR with digital signature? Kindly advice. [U.C]


By virtue of Notification No. 37/2011 dated 01.07.2011, a firm or an Individual or HUF who are required to get the books of accounts audited under section 44AB (i.e., Assessee covered by audit)  are compulsorily required to file e-return with Digital Signature only.


Query 3]

Please guide on the following. We had taken a housing loan of Rs. 18 Lacs in 2004 in which I am the co-applicant & also the co-owner of the flat. Since then my husband has been claiming the tax deduction u/s 80C & 24B as my income was below the basic tax exemption limit. From the F.Y. 2011-12, my tax slab has increased to 30%. Can I claim the balance Principal & Interest, that remains after my husband’s deductions, for deduction from my gross income this FY onwards? [Rachana Dixit]


In case of the Joint ownership, deduction u/s 24(b) towards Interest on borrowed capital & U/s 80C toward the principal repayment of the housing loan is available in the ratio of share of the concerned Joint-owner in the loan availed. Tax payer (i.e., Co-borrower cum co-owner) inter-se cannot decide the ratio for deduction u/s 80C & 24(b).

Query 4]

I purchased one ready-built house from a builder at a cost of Rs 20.50 Lacs & the property was registered on 28th Feb 2010. I also paid the builder Rs. 2.50 Lacs for external development, electrification, gas connection and maintenance expenditure for 5 years. The stamp duty for the registration was approximately Rs. 1.10 Lacs.

But in the month of February 2011, due to some unavoidable reason, the builder has taken back the house from me on 30th April 2011 with an agreement. He has paid me Rs. 26.50 Lacs.  During the period, I have paid Rs. 2.50 Lacs to bank as interest for the home loan. An agreement was signed between the builder and me on 25th March 2011 for the buy back/returns of the house. 

Now my queries are:
  1. Will this transaction be treated as a Sell of Property?
  2. Do I need to pay Tax for the money I received? Will the money gain by me be treated as short term gain?
  3. If I need to pay tax, how much I need?
  4. If I invest again, will it be required to pay the tax? How much time I will get to re-invest the money so that no tax will come?
    I would be grateful to you if you kindly reply to my above queries.


It’s a rare transaction that may occur in exceptional circumstances. The opinion will vary depending upon the facts & circumstance of each & every individual case & the view presented below are based on certain set of presumptions & assumptions and need not be applied in Generality:

  1. If you are executing the Sale Deed back in favor of the builder & if there is nothing to prove anything otherwise, the transaction of this type in normal course would be considered as sale of property. If however, you are executing the Cancellation Deed due to lacunas on the part of the builder, the implication would be different depending upon the words, languages & drafting used in the Cancellation Deed.
  2. else If sale, the surplus arising on sale of flat would be taxable as income. As the holding period of capital assets (i.e., flat). Is not exceeding 36 months, the surplus would be treated as short term capital gain only.
  3. Short term capital gain is treated like any other income and would be taxable accordingly on the basis of regular slab of your income.
  4. As the income arising is a short term capital gain. The benefit of exemption for reinvestment u/s 54 would not be available. Similarly, no exemption would be admissible u/s 54EC for investment in NHAI/REC Bonds.

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