TaxTMI 
TaxTMI 
23 Sep 2016
1329 Views 
Dear Experts
I am writing to seek expert advice on a capital gains reinvestment issue that I have on account of a recent ruling by the Madras High Court.
I had sold a plot in Chennai in February 2014, and the capital gains of ₹ 45 Lakhs arising out of the sale of the plot (after deducting the plot cost with expenses and indexation) is parked in a Capital Gains Accounts Scheme (CGAS) in an approved Bank. As per the CGAS, I had planned to purchase a Plot and construct a house within 3 years, i.e., by February 2017.
After a few years search, I had shortlisted upon a Housing Plot / Site (measuring 4500 square feet) in Rural Tamil Nadu (as that is what my budget could afford me). The Housing Plot / Site is an unapproved plot within a plotted layout (This is the case with more than 95% of the plots in Tamil Nadu as in most other states as well). The total cost of the plot and construction of the house (850 square feet) is ₹ 50 Lakhs. The plot purchase and construction was finalised in July 2016, and the advance payment of ₹ 5 Lakhs for the plot was made by me in August 2016. The Plot was to be registered in end-September 2016, and construction was to commence in the 1st week of October. Since this is a 850 square feet house, the construction was to be completed within 4 months by end of January 2017, before the 3 year reinvestment deadline concludes by early February 2017
There has been a recent development in Tamil Nadu. As of 9th September 2016 the Madras High Court has banned registration of unapproved plots (please see links below)
As per the High Court order, I cannot register the plot (as the plot I am purchasing is an unapproved plot) and therefore I cannot also commence construction of a house on the plot without registering the plot. Though there is a strong possibility that the High Court ruling will be over ruled and a scheme to regularise unapproved plots will be introduced in Tamil Nadu and this will take a few months to be implemented. This will be too late for me as I will not be in a position to register the plot and construct a house on the plot within the 3 year deadline by February 2017. If I do not purchase / register and construct a house on the plot by Feb 2017, I will have to pay Capital Gains with interest for 3 years to Income Tax
The delay in buying a plot and constructing a house on the plot is not account of my fault (I must have evaluated at least 10+ plots since Feb 2014, but all plots that I had shortlisted were legally not clear and I have proofs for the same) I have already paid an advance for the plot, so I am stuck with this developer, and there is no time for me to look for an alternate plot within this budget that is approved by the Government, go through the legal checks and construct within the time frame of Feb 2017
I am writing to seek expert opinion on how I can tide over the issues on account of the new ruling by the Madras High Court and not pay Capital Gains with interest for 3 years to Income Tax. Is it possible for me to write to Income Tax Department explaining the situation seeking an extension of the 3 year reinvestment rule to register the plot and construct the house? What are the other options that I have so that I can save myself the misfortune of not having to pay Capital Gains with interest for 3 years to Income Tax?
Views and advice from experts will be very much appreciated I look forward to hearing from you
Kind regards
P S Krishnan
Chennai
