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Capital gain

gagansomani (Chartered Accountant) (45 Points)

28 February 2013

x received land as a gift....after 10 years he sold another land to construct a property on gifted land .....capital gain is exempt or not??????????

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veny gupta (CA FINAL STUDENT) (49 Points)
Replied 28 February 2013

On gifted land, No tax

For Capital Gain we need to know the details of another land that is sold.

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CA Gaurav Kaushik (Practicing Chartered Accountant) (123 Points)
Replied 28 February 2013

provisions of section 56(2)(vii) have been made applicable from 1^st October, 2009 in case the property is received by any individual or a HUF.

These provide –

a) Where immovable property or any other property is received without any consideration and the stamp duty value (in case of immovable property)/ fair market value (in case of any other property) of such property exceeds Rs.50,000, the entire stamp duty value or fair market value (as the case maybe) of such property would be taxable as income from other sources.

b) Where immovable property or any other property is received for a consideration and such consideration is less than the stamp duty value (in case of immovable property)/ fair market value (in case of any other property) of the property by an amount exceeding Rs.50,000, the stamp duty value/ fair market value reduced by the consideration received, would be taxable as income from other sources.

2. Cases in which provisions will not be applicable -

The above provisions will not be applicable where property is received from a relative or on occasion of marriage of the individual or under a will or inheritance or contemplation of death of the donor or from local authority, approved fund or trust.

The above provisions will also not be applicable where property is received by a company, partnership firm or any person other than an individual or HUF. That means the provisions are applicable only if the property is received by an individual or HUF.

The above amendment will take effect from 1 October 2009, so these will not hit to the cases in which the immovable property has been received on or before 30^th September, 2009.

3. Situations where property was purchased prior to 1^st October, 2009 but not registered :

In such cases, there is a possibility that some officials of the department may try to take a plea which is favourable to revenue and may say that in case of immovable property transfer takes place when it is registered.

However there are some provisions, which may be of help to the taxpayers. These are given below :

a) Section 2(47)(v) of the Income Tax Act states -

"Transfer in relation to capital assets, include -

" any transaction involving the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act"

b) Section 53A of the Transfer of Property Act -

Where any person contracts to transfer for consideration any imovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasobale certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract;

and the transferee has performed or is willing to perform his part of the contract,

then notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract:

Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof