Capital Gain

[Ethirajan Parthasarathy]

An individual enters in to agreement with developer for purchase of an apartment in 2018, and regularly pays the instalment dues to developer in 2020 when the apartment in ready for delivery he executes into tripartite sale deed by which the apartments is registered in the name of third party. This results in substantial gain for the first agreement holder which can be treated as Long term capital gain.

My question for purpose of re-investments, is he to comply with provision of section 54 or 54F.

[TANAY GHILDIYAL]

As per various case law decided the date of transfer will be the date on which all the conditions, as enumerated in the agreement for sale, are complied with that is when the ownership comes in the name of the Individual. So accordingly it will not be LTCG and hence benefits of Section 54 can't be availed.

AI Summary

Date of transfer determines capital gains treatment; where ownership never vested, reinvestment exemption on residential sale is unavailable. The date of transfer is when all conditions of the agreement for sale are complied with and ownership vests; because the apartment was registered in a third party's name and ownership did not vest in the agreement-holder, the gain cannot be treated as long term capital gain for claiming residential reinvestment relief, and that relief is therefore unavailable to the first agreement-holder.