income tax

This query is : Resolved

pradeep (Querist)
Follow

04 October 2010 Sir,
I received a house from my relative,who was owner of the house more than 10 years, as a gift to me, and I sold the same house within one year with profit, Is this profit will be treated as Long Term Capital Gain or Short Term Capital Gain in my hands.
Urgent reply is needed.
Thanks in advance,

Aditya Maheshwari

Aditya Maheshwari (Expert)
Follow

04 October 2010 It would be long term as period of holding would be counted from the date ur relative had purchased though indexation will be available from the year in which it was received by you.

The the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
Follow

04 October 2010 Aditya Ji, pl reconsider the answer regarding cost of improvement(though not specifically sought in query) in view of section 55(2)(ii)of the Income tax Act,1961.

Upgrade to CAclubindia Pro. Subscribe Now!

Aditya Maheshwari

Aditya Maheshwari (Expert)
Follow

04 October 2010 Sir what i understand by the above is that
where the capital asset became the property of the assessee by any of the modes specified in [sub-section (1) of] section 49, and the capital asset became the property of the previous owner before the [1st day of April, [1981]], means the cost of the capital asset to the previous owner or the fair market value of the asset on the [1st day of April, [1981]], at the option of the assessee.

However i think as the query is being asked now and since purchased by the relative of assessee 10 years before and after being gifted being sold now the above provision does not seems to be ineffect for the above query.

Correct me if i am wrong.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
Follow

04 October 2010 Aditya Ji

In the 2nd para of your first observation, it is seen that indexation is available for improvements done by the assessee in the cited case. My understanding is 55(2)(ii) prevents. On that matter alone I sought your reconsideration.

Aditya Maheshwari

Aditya Maheshwari (Expert)
Follow

04 October 2010 I view of discussion above my answer stands modified to the extent mentioned above.