Computing Gains/Losses From Property Transactions

• If the possession of a flat is taken, the date of the agreement of purchase of the flat will be construed as the date of acquisition and not the date of payment/date of registration.
• A capital asset held for more than 36 months would be classified as a long-term capital asset. The income therefrom would be a long-term capital gain or loss, as the case may be. 
• Assessees can file their IT returns and claim any losses incurred under the head ‘Income from House Property’ to be carried forward even if they have not filed their return of income before the due date (viz. July 31). Such losses can be set off within eight assessment years.
• The Assessing Officer may call for the details and re-assess the income in case he/she finds that certain income has escaped assessment.

Question

I was a tenant in a flat since December 2004. Around March 2009, I entered into an agreement with the landlord to purchase the said flat. However, it was decided then that the payment would be made within seven months of the said agreement of purchase, and registration of the agreement would be effected only after the payment. I now propose to sell the said flat. What is the date of my acquisition of the flat in order to compute whether it was a short-term or long-term capital asset?

Arvind Shah

Reply

As the possession of the flat was with you, the date of the agreement of purchase of the flat will be construed as the date of acquisition. The date of payment/date of registration would not be relevant to ascertain the date of acquisition in your case. Since the flat was purchased in March 2009, the asset is held for more than 36 months, and hence, would be classified as a long-term capital asset. The income therefrom would be a long-term capital gain or loss, as the case may be.

There are several controversial judgments as regards the date of acquisition, which are based on the facts and circumstances of each case.

Question

I have purchased a commercial property and have let out the same. I had acquired the said property out of borrowed capital, and hence, there is huge interest outgo. For the financial year ended March 31, 2012, I had a loss of Rs 300000. Besides, I am earning an income of Rs 120000 from other sources.

I have not filed my return of income for the aforesaid financial year. Now, I have been told that I shall be allowed to carry the loss forward in the future only if I file my return of income in time. Can I file my return of income for the year ended March 31, 2012 now and claim the said loss to be carried forward? Please advise me.

P. Velkar

Reply

It is true that under the Income Tax Act, 1961, to carry forward losses under the head ‘Income from Business’ and ‘Income from Capital Gains’, assessees needs to file their return of income before the due date. However, the same is not applicable for ‘Income from House Property’. Thus, even though you have not filed your return of income before the due date, viz. July 31, 2012, you will still be able to file your return and claim the loss to be carried forward and set off within eight assessment years. You will be able to carry forward the loss as remains after setting it off against your other income for the year.

Question

I have filed my return of income for the year 2007-08, during which I had made investments worth about Rs 500000 in mutual funds. I have received a notice from the Income Tax Department asking me to verify the said investments. Can they do so?

J. Singh

Reply 

The Assessing Officer is within his/her rights to call for the details and re-assess the income in case he/she finds that certain income has escaped assessment. However, the Assessing Officer can do so only after obtaining approval from the concerned Commissioner of Income Tax.