Capital Gain, Sec. 50-C

[HIMANSHU JARIWALA]

Dear All.

Mr. X had Purchased residential property in 1995. and paid full value of consideration at that time. But due to some reason he had not made sale deed for the same and the property is aquired on "Kabja Receipt". He had receipt of all the payments made to the builder at thet time. Now he wants to make sale deed for the same. But Stampduty Value of the same property U/s 50-C is much high now. So is thare any Capital Gain on above?The builder asking of txa on the same from Mr.X.

This is the only property Mr. X own.

[DEV KUMAR KOTHARI]

Mr. X is buyer so S. 50C is not applicable on him. No addition can be made in his hands as he has not made any undisclosed investment which is proved by the AO. The builder should not ask for extra money becasue in his case S. 50C should generally be not applicable as he trades in properties and income is computed as business income and not capital gains..

For registration of property, as being under contractual obligations and moral duty builder should not ask extra money. however, keeping aside morals and honesty it has beocome general practice of buildiers to ask some consideration at the time of registration particularly when it is delayed very much.

Other course can be tried to register a declaration of the buyer of his ownership of property giving full details, copy of agreement and kabja receipt etc. So that  fact of property bought is in  public record.

AI Summary

Stamp valuation rule not normally imposes capital gain tax on a bona fide buyer with prior payment despite delayed registration.
The purchaser who paid full consideration years earlier and holds receipts and a kabja receipt should not be subject to stamp-valuation-based addition as capital gain; the stamp valuation adjustment ordinarily concerns the seller's computation, while the buyer can evidence prior payment and record a declaration of ownership to prevent registration-time disputes.