Int paid during construction period is treated as cost

[GOPAL GUPTA]

Dear Sir

Mr X has booked a flat in Jaipur ( Raj. )  with a private builder in June 2007  and  to pay the cost of flat  he has taken a housing loan . The possession of the 

said flat was taken in Dec 2009. Now Mr X sold the flat in August 2010 and has purhcases  another flat in Sept 2010  .

1. Whether he can take benefit of  long term capital gain as the period of  date of booking and date of sale is more 36 months or only date of possession will count for the purpose of Long term capital gain. Please give your opinion looking to the recent judgement of Pun and Har court and also of  Bombay HC.

2. In case it is treated as short term capital gain,   whether Mr X can treat the interest paid as cost of acquisition of the assets. Please give  the opinion on the basis of some  case laws. 

AI Summary

Tax Benefits on Flat Sale: Long-Term Capital Gains Apply from Agreement Date, Interest During Construction as Acquisition Cost An individual booked a flat in 2007, took possession in 2009, sold it in 2010, and purchased another flat. The query concerns whether the transaction qualifies for long-term capital gains tax benefits, considering the period from booking to sale exceeds 36 months. The response indicates that it should be treated as a long-term capital gain from the date of the agreement, referencing various court decisions, including Madras High Court and Supreme Court rulings. Additionally, if considered short-term, the interest paid during construction could be treated as part of the acquisition cost.