27 November 2012
A land was purchased originally as agricultural land and it was not capital asset.Please consider the following facts and explain the treatment. Date of Purchase of Land 7th Mar 2009 Diversion of a part of Land into commercial land 1st April 2010 Sale of Land on 26th Nov 2012 My Question is Sale of Diverted part would be treated as STCG or LTCG. Please explain with relevant points and provisions of Section.
27 November 2012
"short-term capital asset" means a capital asset held .X.X.X. by an assessee for not more than thirty-six months immediately preceding the date of its transfer :]
The period of holding shall be reckoned from 7/3/2009. Has the words"AS SUCH" been there in .X.X.X above, the confusion as to 1/4/2010 or 7/3/2009 would have arisen.
27 November 2012
Agricultural land will not attract any capital gain but the land which is diverted is now commercial therefore tax would be applicable on the same but the question is whether STCG or LTCG i.e. period of holding will be seen from the date of diversion or the date from original holding.
27 November 2012
Sir can u tell me that will diversion will effect recognition as this was agricultural land first and then commercial...?? please explain with relevant clause...
27 November 2012
Period of holding shall be reckoned from 07/03/2009. Hence it is a long term capital asset transfer. And if any money is used for convertion of land , that shall be treated as improvement cost.
28 November 2012
Till 1/04/2010 it was not capital asset and after diversion it was commercial land and hence it would be treated as capital asset from 01/04/2010.So will it be long term capital asset or short term capital asset ?
28 November 2012
Palak, got your point of diversion. It is quite GOOD and INTERESTING point. Permit me to repeat....while computing the period of holding of capital asset, do not deny the fact that it was not an ASSET at all. It was not "capital asset" is right. But it was ASSET. So count the period of holding from 7/3/2009.
29 November 2012
Thank You sir for your reply but still as per the basis of charges of CAPITAL GAIN : 1) IT SHOULD BE CAPITAL ASSET FIRST. 2) SECONDLY IT WAS ASSET BUT NOT CAPITAL ASSET TILL 31/03/2010 AS PER INCOME TAX ACT. sir, is my interpretation correct to recognize as sale of of diverted part as STCG as this was asset as per ITA 1961 as on 1/04/2010.Please Reply.
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