capital gain tax

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Querist : Anonymous

Querist : Anonymous (Querist)

23 March 2011 My parents bought a house in 1990 for Rs 18 lac. They gifted it to me in 2007. Now, if i sell the house for Rs. 48 lac, how will my capital gain tax be calculated?
1. Capital gain tax on entire 48 lac
OR
2 Capital gain tax on 48-18=30 lac(after indexation)?

CA Namrata Dedhia

CA Namrata Dedhia (Expert)
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23 March 2011 Capital Gain will be on 48-18(with indexation from 1990)

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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23 March 2011 But indexation is allowed for 1990 in

Mrs. Pushpa Sofat Vs ITO (2002) 81 ITD 1 (Chd-Tri).

Namrata Ji, pl commend.

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CA Namrata Dedhia

CA Namrata Dedhia (Expert)
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23 March 2011 Yes Chackrapaniji, I overlooked the case law part. Even Mumbai Spl Bench has said the same thing in the case of Manjula Shah. Thanks for reminding

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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23 March 2011 But the section is very clear and against the two decisions meaning thereby only indexation for 2007 should be allowed.

CA Namrata Dedhia

CA Namrata Dedhia (Expert)
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23 March 2011 But these decisions have spoken about the wordings of the section and that it should not be read literally. Pls refer Manjula Shah for the comments on the wordings of the section.

CA Namrata Dedhia

CA Namrata Dedhia (Expert)
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23 March 2011 Chackrapaniji,

Why are you taking both views?

Querist : Anonymous

Querist : Anonymous (Querist)

23 March 2011 Someone told me that i need to need to pay tax on entire 48 lac because my acquisition cost was nil (gifted property). Is that not true?

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Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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23 March 2011 Namrata Ji

I follow the wordings in the 1961 act. I cited the issue for your valuable comments. Tribunal is behind harmonious construction. If the legislature's intention was that ,the wordings would have been different from what it is now. Moreover there are settled decsions, not on identical issue, that the court have no power to insert/replace words in the sections of law. Tribunal decision is not final. Till an apex court decision comes or legislature changes /amend the law I will undoubtedly follow the law as I said from the very begining.

CA Namrata Dedhia

CA Namrata Dedhia (Expert)
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24 March 2011 Mr. anonymous,
In case of gifted property, you get the benefit of the cost to the previous owner. So you capital gain is not 48 but 48-18(indexed from 1990)

Chackrapaniji,
You are right that the tribunal's judgement is not the final decision, but nevertheless it is binding on the authorities which are below it.

And it is arguable whether this is a case of insertion/replacement of words in the sections of law or interpretation of law on the basis of the intent of the legislature and the rule of harmonious construction, which an accepted method for interpretation of law.

I would like to believe that where the law is allowing inclusion of period of holding of previous owner and cost of previous owner to be adopted, indexation benefit should also be given from the time of holding of the previous owner. The intent of the law is clear in the first two cases, which is possibly only missed in the later case.

Also, the fact that the law has yet not been amended to reverse the tribunal decisions, can also be taken in support of this argument.

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