Filing of revised return due to Capital Gain complexities

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  1. Sanjay Mehrotra

    Sanjay Mehrotra New Member

    I have a very peculiar case under Section 54. I had deposited Rs.5,92,936 as initial payment with the builder (Tata Housing) in Jan/Feb 2011 for purchase of a flat under construction in Chennai.

    In May 2011 (FY 2011-12), I sold my flat in NOIDA and this generated a Capital Gain of Rs.12,21,065. Since I could not invest the full amount of Capital Gain for the purchase of new flat prior to the filing of Income Tax return during the FY 2011-12, I deposited the balance of the Capital Gain of Rs.6,28,129 (I rounded this off to Rs.7 lakhs in CG account scheme) in Capital Gain Account scheme in May 2012 to avoid capital gain tax.

    The builder did not request for additional funds subsequently due to legal/clearance issues with the State Govt authorities and construction was put on hold.

    Since the 2 year period (i.e. invest capital gains by May 2013) could not be met, I had to pay long term capital gain tax on Rs.6,28,1297 deposited in the Capital Gain account. The FY 2013-14 return was filed in Jul 2014 and a capital gain tax of Rs.1,00,248 was paid.

    In Jun 2015, the builder issued a letter stating that they had cancelled the project and returned the initial amount of Rs.5,92,936 that was paid by me in Jan/Feb 2011. In addition they also paid interest on this amount.

    I have already accounted for the interest that the builder paid in my tax calculations and showing it as ‘Income from other sources’ and to be charged as per the tax slab. However, I’m not sure how to address the Capital Gain on the returned Rs.5,92,936 that was previously claimed as a deduction in FY 2013-14 return. How is to be reflected in the Income Tax return?

    I have also been advised that I should file a revised return for FY 2013-14, which can be filed no later than 31 Mar 2016 and I should account for the full Capital Gain again including the advance returned by the builder in Jun 2015. However, I am not sure of this as revised returns are usually filed for unintended mistakes or omissions, which is not the case mentioned by me. Also would this result in a penalty ?

    I have to take a call on this matter before 15th March since that is the last day of advance tax so any guidance at the earliest will be appreciated.
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