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Capital gain

Vibhor Pandey (FINAL) (106 Points)

25 September 2011

My Question Is Related To Section 45(5) Deals With Computation Of Capital Gain In Case Of Compulsory Aquisation Of a Capital Asset.My Question Is..
(1)How We Calculate Period Of Holding In Such Cases. For Example If A Capital Asset Is Purchased In 1985 And Was Aquaired By Government In 1986 For Rs. 2500000. On May 2011 The Owner Gets 500000 Rupees As Part Payment From Government.
How Will We Treat This?
it is STCG OR LTCG??

(2) when enhanced Compensation received in installments how we treat that.
like..The High Court Increase The Compensation From 5000000 to 9000000 the additional compensation of 4000000 is receved as 2500000 in that year and remaining 1500000 in next year. how it will taxable??

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CA RICHA BADALIA (CA,CS) (1682 Points)
Replied 25 September 2011

As per Sec 45(5) when a capital asset is compulsorily acquired by government it will be treated as transfer of the previous year in which the asset is compulsorily acquired but capital gain will be taxable in the year in which the compensation or part thereof is first received.Enhanced compensation will be taxable as and when it is received.Its COA will be be NIL..Therefore in your case CApital gain will be charged in 2011-12 but period of holding will be from 1985 to 1986.It will be Stcg in your case .

Enhanced Compensation will be fully taxable in the year in which it is received.COA will be NIL.

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