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Capital Gain

30 August 2010

I have a case study. I will be delighted to receive replies.

Mr. A has inherited a Land & Building from his father on his death in 1995. His father acquired the property for 1 Crore. Mr. A than started a business and used the L&B as an business asset from 1996 to 2004. He also took depreciation on L&B for the said period. After the year 2004, the assessee discontinued his business when the WDV value of the L&B was 20 Lakhs. In the year 2010 the assessee sold the L&B for 2 Crores. The stamp duty valuation of the Land was 2 Crores and that of building was 1.5 Crores. What is the tax implication on the above transactions and how the assessee can reduce the tax liability.

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3 Replies

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 30 August 2010

Visit this link. See if this helps your cause.

/forum/capital-gains-query-61691.asp

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Sanjay Singh Rana (CA) (208 Points)
Replied 30 August 2010

Hello dear,

In this case first of all there is transfer of capital asset therefore we have to check wether there is capital gain or not.

1) In the hand of the deceased ( A father ) transfer is an exempted transfer under section 47

(no treatment for transfer)

2) In the hands of Mr A we have to check the applicability of following sections

-section 49(1) which provide COA( i.e cost to the previous owner) in case transfer of capital asset without consideration and period of holding will be taken from the day when his father bought the asset ( not given by you)

assuming if purchased before 01/04/81 ( FMV being lower than purchase price) as per sec 55(2)

and please note for the purpose of head capital gain both land and building are seprate asset because

land is non depreciable, any capital gains/loss will be calculated as per provision of section 48

and

Building is deprecialble capital asset, capital gain/loss will be calculated as per section 50(1) & (2)

so it can aslo be said if A is taking land with building under same block and providing dep it will be wrong

and at the time of sale we have to check the applicability of sec 50(c)

since your full value of consideration seems to be lower than Stamp duty value, Stamp duty value will be take as full value of consideration.

and capital gain on land will be calculated as per provision of section 48 and gain or loss will be long term here fvc will be 2 crore

indexation will be done for the year when asset was first held by assessee

In case of builing gain or loss will be short term .... sec 50(1) & 50(2) here FMV will be 1.5 crore

In case there is unabsorbed depriciation due to business loss it can be carried forwrd without any limit. and u can check section 54 for exemption of capital gain :)

hope it will give you some idea

Thanks

1 Like

nitin (back offi) (25 Points)
Replied 24 September 2010

I was bought a flat in 2003-04 total cost including stamp duty Rs. 2,60,000. today guidline of my flat (market value as per registrar/govt) is 9,50,000, and i sold my flat to party in just 8,00,000. but today at the time of registry of flat we will paid STAMP DUTY on 9,50,000 this is ok, but i sell my flat in 8,00,000 Rs. which will mention in registry. so market rate is 9,50,000 and selling rate is 8,00,000 so please tell me what is my capital gain :- 950000-260000 or 800000-260000. and also i want to know that if stamp duty,legal fee,brokrage paid by me again when i sell flat, all this deduct in my capital gain (eg. - LTCG=(800000-260000)-stamp duty etc)