Q.
What is a Conditional Contract in RPGT? What then is "Conditional Contract of Sale"?
What is a Conditional Sale in Real Estate?
From Real Property Gains Tax Act, 1976:
'Conditional contracts
16. Where—
(a) a contract for the disposal of an asset is conditional; and
(b) the condition is satisfied (by the exercise of a right under an option or otherwise),
the acquisition and disposal of the asset shall be regarded as taking place at the time the contract was made, unless the amount of the consideration depends wholly or mainly on the value of the asset at the time when the condition is satisfied in which case the acquisition and disposal shall be regarded as taking place when the condition is satisfied.'
Conditional Contract in RPGT
The significance of a conditional contract is that the disposal and acquisition date of the chargeable asset concerned depends on the date the condition or the last of the conditions is/are fulfilled.
A contract is conditional for purposes of RPGT if the contract requires the approval of the government or a state government, or an authority or committee appointed by the government or a state government. The date such approval is given would constitute the date of disposal.
Example: Approval required from the Securities Commission for proposed transfer of assets.
http://www.accaglobal.com/content/dam/acca/global/pdf/sa_apr11_p6mys_rpgt.pdf
Conditional Contract of Sale
Arrangement where a buyer takes possession of an item, but its title and right of repossession remains with the seller until the buyer pays the full purchase price (usually in installments stretched over months or years). Common type of agreement used in the financing of machinery and equipment, and real estate. Also called conditional sale contract.
Ref:
Business Dictionary, available at
http://www.businessdictionary.com/definition/conditional-sale-agreement.html#ixzz3Mrsq7Wep
Conditional Sale in Real Estate
A conditional sale is a real estate transaction where the parties have set conditions.
A standard real estate transaction usually begins when a prospective purchaser submits an offer to purchase to the vendor of a property. As in a standard offer, a conditional offer sets out the terms of the sale such as the purchase price, the date of closing, the names of the parties, and the amount of any required deposit, but it also stipulates various conditions which must be met in order for the contract to be binding on the parties.
These conditions may include approval by a co-purchaser, financing acceptable to the purchaser, the receipt and review of a survey showing that the buildings on the property comply with local zoning regulations, a title search showing no unacceptable liens or encumbrances, confirmation from the current mortgagee that the property is not in foreclosure, and the like. If the offer is accepted by the vendor, the offer to purchase will become a contract binding on the parties when all conditions are satisfied.
An alternative to a conditional sale is an invitation to treat. Unlike a conditional sale, an invitation to treat does not become binding upon satisfaction of any conditions. Issues arise as to the distinction between actions which constitute an offer or an invitation to treat, especially when the intentions of the parties are not clearly specified at the time.