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Flat Cancellation Amount Received in Excess of Booking Amount is Capital Gain : ITAT


                                                          CA Ramesh Agrawal

If a Person books a flat & after sometime deal is cancelled with builder, then the amount received in excess of booking amount will not be Tax-Free Income.

In layman language, earlier it was not considered under Capital Receipt. In recent order, The Income Tax Appellate Tribunal (ITAT) Mumbai Bench has ruled that the excess amount received is to be taxed in nature of “Capital Gains”. This ITAT Order will also help to other states, if there is no other contrary order.

 During the assessment, an IT Officer treated the excess amount received from booking as “Income from Other Sources”.

 As per Section 54 of the Income-Tax Act, if Long Term Capital Gain (LTCG) arising out of a sale of a house is invested in another house in India within a specified time period, then to the extent of such investment, the Capital Gain Taxable amount is reduced. This results in a lower Capital Gain Tax outgo. Hence, if the full amount of LongTerm Capital Gain is invested, then no tax is payable.

The Tribunal declared this sum as capital gains, which attracts less tax than other sources of income. Earlier this year, the Central Government had changed the holding period for LTCG from one year to two years.


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Comments

  1. Radhakrishnan17 September 2020 at 05:57

    Sir, which builder returns more money than the booking amount? It is very difficult to get back the advance amount from builder.

    ReplyDelete

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