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Capital gain

Prathyush.P.G. (Derivative analyst and CA Coaching ) (179 Points)

17 June 2011

The scenario is like this

The party has bought a property which valued 10 lacs during 2009-10 ,and now the party has decided to increase the value shown in documents to 41 lacs for the same property paying proper stamp duty

the question is whether this will amount to capital gain ? ,if so please reply with the logic applied,

im not saying thanks in advance ,cause im eagerly waiting for responses from you guys! ,thanks will be provided live :)

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16 Replies

CA Mohit Saxena (FINANCE MANAGER) (343 Points)
Replied 17 June 2011

In my opinion Capital gains are charged on 41 Lakh Rs. because whiln calculating Capital Gains if u look at the definition of Sale Consideration Charged is the value at which property is sold or value for Stamp Duty.

So in that case as ur client hv made an amendment in documents and also deposit the stamp duty in that case it is advised to deposit balance tax with the deptt along with interest , if any.

As the property value is Rs. 41 Lakh so if u try to hide information from department they will know about it

through Annual Information Return (AIR) submitted by stamp value authority and i think they have to submit details of transaction above the value of 30 Lakh Rupees.

If deptt comes to know abt dt dn dey will issue SCN to assessee for concealment of income.

So, show the value as 41 Lakh and pay tax on that amount

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A G Vishal Kirthic (Chartered Accoutant) (236 Points)
Replied 17 June 2011

This will not amount to transfer u/s 2(47) and hence the question of Capital gain doesn't arise. But, assuming the property to be an investment not used for business purpose, as per AS 13, the same is to be valued only at cost and not at the Market Value.

Prathyush.P.G. (Derivative analyst and CA Coaching ) (179 Points)
Replied 17 June 2011

thanks guys,im reading it,will be replying soon

Prathyush.P.G. (Derivative analyst and CA Coaching ) (179 Points)
Replied 17 June 2011

Dear Mohit,

so as per ur opinion ,my client should be paying his capital gain tax on 30 Lacs,right ?

and that be a short term capital gain, right ?

Prathyush.P.G. (Derivative analyst and CA Coaching ) (179 Points)
Replied 17 June 2011

@ vishal karthik- i tried the reasoning with ur reply,but rather its not the exactly the case here,and its hardly we can argue with IT when law says differently,with the help of AS ,i found Mohit's reply more logically fit the realm here,
im really greatful that you made an effort to comment,thanks !

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CA Mohit Saxena (FINANCE MANAGER) (343 Points)
Replied 17 June 2011

Thnx Pratyush......

Prathyush.P.G. (Derivative analyst and CA Coaching ) (179 Points)
Replied 17 June 2011

u r welcome :) ,im not sure how i could repay you,may be i could help someone in trouble someday! :)
adieu guys!

CA Mohit Saxena (FINANCE MANAGER) (343 Points)
Replied 17 June 2011

Originally posted by : Prathyush.P.G.
	u r welcome :) ,im not sure how i could repay you,may be i could help someone in trouble someday! :) adieu guys!

Pratyush CCI is for knowledge sharing, these kind of things we cant think sitting ideally but here we got a chance to share our thoughts and knowledge and thnx for sharing ur problem

CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 17 June 2011

Originally posted by : Mohit
	Originally posted by : Prathyush.P.G. u r welcome :) ,im not sure how i could repay you,may be i could help someone in trouble someday! :) adieu guys! Pratyush CCI is for knowledge sharing, these kind of things we cant think sitting ideally but here we got a chance to share our thoughts and knowledge and thnx for sharing ur problem

THANKS SIR FOR BEAUTIFUL REPLY

Arvind Sharma (ACA) (1432 Points)
Replied 17 June 2011

Originally posted by : Vishal Kirthic
	This will not amount to transfer u/s 2(47) and hence the question of Capital gain doesn't arise. But, assuming the property to be an investment not used for business purpose, as per AS 13, the same is to be valued only at cost and not at the Market Value.

agreed.......

There is no transfer and accordingly no capital gain is no arises.... And further, in case of subsequent transfer of the same property, Cost of Acquition will be Rs. 10 Lacs and not Rs. 41 Lacs

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@*CS Siddharth Bumb. * (B.Com, CA Final, CS ) (5270 Points)
Replied 18 June 2011

there is no transfer and hence no capital gain..

Aparna Raja K.C (Student) (520 Points)
Replied 19 June 2011

Capital Gain ia gain arrising out of transfer of a capital Asset..

Since revaluation of asset does not amount to transfer user section 2(47) , there wont be any capital gain :)

Prathyush.P.G. (Derivative analyst and CA Coaching ) (179 Points)
Replied 19 June 2011

When the stamp duty is paid on the excess amount to be documented the case of Capital gain arised there,so there is short term capital gain,

thanks for the response,capital gain, is not the mere transfer

CA,CMA,CS Karan Gogia (Employed) (230 Points)
Replied 19 June 2011

C.G can only be chargerd in case of transfer u/s2(47)...

my brother...dont apply your logic to incometax act, it has to be interpreted strictly as it is written.

the confusion arises to u only beacuse of the fact that u have registered the enhanced value with registering authority....just forgot this and think of normal revaluation...u will b clear

A.O on even gettin the info can never bother u...u have just revalued your asset... in documents...it doesnot make any diffrence that u also enhanced that value with the registering authority by paying stamp duty.....

appreciate the views by mr. arvind sharma