Validity of Letter of Allotment by ITO

[Vishal v Kanakia]

Dear Sir,

I have purchased a Under-Construction Residential Flat in July 2011 by paying 75% Agreement Value.

Builder issued me Letter of Allotment on the same date.

I signed Sale Agreement and paid Stamp Duty + Registration Charges + VAT + Service Tax in September 2013.

Thereby I paid Balance 25% Agreement Value in March 2014.

The Building is still under-construction and I have not taken possession from the builder.

Now in December 2015, I sold my Under-Construction Flat to Mr X.

Further, I have invested the entire proceeds of the above Sale of Flat in a another ready to occupy Flat.

Now I have 3 options for the above transaction :

1) I pay Short Terms Capital Gains Tax (As sale is before 36 months if Agreement for Sale is considered as valid).

2) I pay Long Terms Capital Gains Tax (As Sale is after 36 months if Letter of Allotment is considered as valid).

3) I claim Tax Benefit under section 54F of Income Tax (As Sale is after 36 months of Letter of Allotment + New Residential Flat is purchased from its Sale proceeds).

Please guide what is the best option available for the above Transaction.

Regards,

Vishal K,

Mumbai.

AI Summary

Homebuyer Seeks Tax Guidance on Capital Gains: Letter of Allotment vs. Sale Agreement and Section 54F Benefits An individual purchased an under-construction residential flat in July 2011, paying 75% of the agreement value, and received a Letter of Allotment from the builder. A Sale Agreement was signed in September 2013, with additional payments made. The flat was sold in December 2015, and the proceeds were reinvested in a ready-to-occupy flat. The individual seeks guidance on tax implications, considering options for Short-Term Capital Gains Tax, Long-Term Capital Gains Tax, or claiming a tax benefit under section 54F of the Income Tax Act, based on the validity of the Letter of Allotment or the Sale Agreement.