25 October 2010
if an individual who has capital gain on sale of agriculture land, purchases a rural agri.land to take the benefit under section 54 B of the Income tax Act.and if he transfers the same within a period of 3 years, then whether the benefit which was taken will be withdrawn??
25 October 2010
As the new asset is not a capital asset- there will be no Capital Gains on its transfer.
For calculating Capital gains on transfer of new asset within 3 years , withdrawal of exemption earlier enjoyed, is indirectly made by reducing the new asset's cost of acquisition.
let's take an example- which is applicable to transfer of a capital asset-
Capital Gains 2 New Asset purchased 5 exempted LT capital gain 2 New asset sold within 3 yrs for 10 Capital gains= 10-(5-2)=7
So if Gain is 7 but it's not a Capital Gain if the asset is not a capital asset.
11 November 2010
1. Capital Gains arises only on transfer of Capital Assets. If the asset transferred is not a Capital Asset (as defined U/s 2(47) let's take the same example, assuming that the assset transferred is a rural agriculture land. Capital Gains on sale of old Urban Agri land 2 New Asset purchased-Rural Agriculture Land of Rs. 5 LT capital gain exempted earlier 2 New asset sold within 3 yrs for 10 Capital gains ? = 10-(5-2)=Rs. 7
But 7 is not treated as a capital gain because the asset transferred is not a capital asset. As such, practically, there is no withdrawal of capital gain claimed earlier.
CAclubindia
