A 1993 Property Deal: Court Says Over, Taxman Says Begin
[Query 1]
In 1993 my son entered into an agreement to sell his plot for ₹ 1.95 Lakh and received ₹ 50,000/- from the purchaser. Due to some reasons, litigations in court were going on and the trial court granted specific performance to the purchaser and ordered to execute sale deed in 1998. The purchaser deposited the remaining amount of ₹ 1.45 Lakh, which by court order invested in a Bank fixed deposit in the court name. Appeals were going on in the High Court and Supreme Court up to 2024. The deposits of ₹ 1.45 Lakh which was made in the Bank was earning interest and TDS @ 20% was deducted yearly as the court has no PAN card. In March 2025, finally the court ordered to execute the sale deed through his representative’s name (as Seller) with his PAN, Aadhaar card. Court’s judgment copies are also enclosed with sale deed for sale consideration of ₹ 1.95 Lakh only. The Stamp Duty Value (SDV) of this plot is ₹ 42.19 Lakh & the stamp duty of ₹ 2.95 Lakh is paid by the purchaser. After registration, the court permitted my son to withdraw the amount standing in the Bank Fixed Deposit A/c, the balance with accumulated interest of around ₹ 8 Lakh which is withdrawn now.
In my son’s AIS of FY 2024-25, no amount of ₹ 1.95 Lakh of ₹ 8 Lakh is shown as the same is executed on court’s representative PAN no. So considering these facts, I have received ₹ 1.95 Lakh & ₹ 8 Lakh against this plot market value of ₹ 42.19 Lakh which is his Long Term Capital Loss. So kindly advise me of any provision or case law/judgement to claim huge long term capital loss of (₹ 42.19 Lakh – ₹ 1.95 Lakh) = ₹ 40.24 Lakh. So now, my son is in confusion whether he should claim Long Term Capital Loss for this transaction entry which is not in AIS? If not claimed, which amount to be shown (either ₹ 1.45 Lakh or ₹ 8 Lakh) in Income Tax Return as received amount and at which place/schedule to be shown against this transaction to avoid any notice from IT Dept. Please guide me for the above query. [Shamrao S Zade – nareshzade24@gmail.com]
Reply:
In India, property disputes often outlive family feud and sometimes even the owners themselves. Here’s a case where a plot sold in 1993 finally got registered in 2025-32 years, 2 generations of courts, and a lifetime of tax complications later. This is a classic example where law, logic, and tax treatment don’t always run in the same direction. Let us carefully analyze:
1. Sale Consideration for Capital Gains:
As per strict law, Section 50C mandates adopting ₹42.19 Lakh as consideration. The said section of Income-tax Act works like a stubborn mother-in-law-it doesn’t care what price you actually agreed upon, it only believes what the Stamp Duty Officer whispers in its ear. However, in light of the 1993 agreement and court-driven execution, you may take a position to offer ₹1.95 Lakh, supported by possible judicial sympathy if contested. If the tax department disputes adoption of ₹1.95 Lakh, your defense could be-
a) Since the agreement was in 1993-before Section 50C existed-the higher SDV rule didn’t apply; at most, the SDV of 1993 could have been considered. Courts have often accepted original agreement dates in such cases if the genuineness of the transactions is established.
b) If the SDV is challenged, the Income Tax Officer (ITO) may refer it to the Departmental Valuation Officer (DVO). Since the agreement dates back to 1993, backed by records, DVO is likely to consider that while valuing.
In short, the present SDV of ₹ 42.19 Lakh would not be relevant in your case and you can adopt the sale consideration at ₹ 1.95 Lakh while offering the income for taxation in FY 2024-25.
2. Sorry, No Sympathy Loss Allowed:
The loss as mentioned & computed by you is a notional loss and not the actual loss. There is no provision in the Income Tax Law to allow such loss as deduction. Hence, the “loss” shown by comparing market value with actual cash received is not allowable.
3. What about the ₹8,00,000/- received & TDS thereon?
a) The ₹8 Lakh is not part of the sale consideration-it is simply accumulated interest on the buyer’s deposit. It should be taxed separately under ‘Income from Other Sources.
b) Since you have never offered it for taxation in earlier years as the issue was pending before the court and you have not admitted the ownership of the same, it will be taxable in the FT 2024-25 only though it has accrued in earlier years also.
c) Since TDS was done in an earlier year and since the same was not claimed in respective years, you should claim the credit towards the entire TDS amount in this year as it is offered for taxation in this year only. Claiming TDS credit may be tough as it won’t appear in 26AS or AIS-you’ll need to pursue rectification with CPC/ITO using court documents. In case of denial, file a rectification request under section 154 with the CPC as well as jurisdictional ITO explaining the unique facts: court-ordered deed, amount deposited, interest earned, TDS deducted without PAN, and final withdrawal.
4. AIS or No AIS – The Tax Law is more important:
i) Non-appearance in AIS doesn’t mean it’s exempt from disclosure. AIS is a reporting tool, not the law. Think of AIS as the CCTV camera of the taxman. If the CCTV is off, it doesn’t mean the crime didn’t happen-it only means you won’t get the footage when you need it most. You still need to report the income – or risk a surprise notice from the taxman late.
ii) In ITR:
• Show sale under Schedule CG (Capital Gains) with sale consideration = ₹1.95 Lakh.
• Show interest income in Schedule OS (Other Sources).
• Claim TDS credit based on court’s TDS certificates (though at 20%).
In summary:
• No LTC Loss can be claimed here, because Section 50C forces adoption of ₹42.19 lakh as consideration.
• Sale proceeds may be taken at ₹ 1.95 Lakh as against law under section 50C requiring to consider the stamp duty valuation of ₹ 42.19 lakh.
• Interest on court deposits taxable under “Other Sources.”
• Disclose correctly in ITR, even if not in AIS. One may note that AIS is only a reporting mechanism. Non-appearance in AIS does not absolve the taxpayer from reporting income as per law.
In taxation, law may sometimes ignore practical hardships & real cash flow. The key is to disclose correctly and be prepared with records in case of scrutiny. Courts may delay your money for decades, but the taxman’s calendar is always perfectly punctual-he’s the only one who never believes in ‘Tareekh pe Tareekh’.”
[Views expressed are the personal view of the author. Readers are advised to seek professional advice before taking any decisions. Readers may forward their feedback & queries at nareshjakhotia@gmail.com. Other articles & response to queries are available at www.theTAXtalk.com]
