Ameet (L) (1678 Points)
30 November 2009What will be the treatment of tax implication?
land purchased - 01/04/1984 - Rs. 1,00,000/-
building construction Cost- 10/04/1985 - Rs. 2,50,000/-
Deprecition Charge from construction at 10% in the balance sheet
Sale of Land & Building - 25/11/2009 - Rs. 20,00,000/- ( No alocation over land & building)
What will be the Basis of bifurcation of sales amount amoung land & build ?
Dinesh N
(Article)
(156 Points)
Replied 30 November 2009
From your question it appears that the building and land was used for business as Depreciation u/s 32 has been claimed.
The value of Land and Building should be accounted seperately as Land is not subject to Depreciation and building is subject to depreciation.
Treatment at the time of Sale
Prabeer
(B. COM (H) CA & CS Final)
(5484 Points)
Replied 30 November 2009
As per my opinion there will be no bifurcation of the sales amount among land and bldg.
But, the calculation for LTCG will be like:
| Rs. | |||
| Sale value of Land & Bldg | xxxxx | ||
| Less: Indexed cost of acquisition on land | xxx | ||
| Less: Indexed cost of improvement on bldg | xxx | ||
| xxxx | |||
| LTCG | xxx |
Shashi Bhushan
(Learner, Jalandhar)
(996 Points)
Replied 30 November 2009
Wrong Answers.
in Case of Depericiable assets there can be STCG only.
now building is depreciable and land is not. so we must have to bifurcate it.
there will be STCG on building (if any) without any indexation.
and LTCG on Land after indexation.
i have replied you in PM how to allocate cost.
CA. Varun Soni
(Chartered Accountant)
(201 Points)
Replied 30 November 2009
In your question :-
1. Land will be considered as a long term capital asset and
2. Building as Short term capital asset b'coz you are claiming depreciation on it. No indexing will be allowed in case of building.
Sunali
(Learner)
(1317 Points)
Replied 30 November 2009
| Originally posted by :Shashi Bhushan | ||
| " | Wrong Answers. in Case of Depericiable assets there can be STCG only. now building is depreciable and land is not. so we must have to bifurcate it. there will be STCG on building (if any) without any indexation. and LTCG on Land after indexation. i have replied you in PM how to allocate cost. |
" |
agree...Building will attract sec 50, since a depreciable asset and land will be taxable u/s 112 as a non-depreciable asset.
Harshal
(Article Assistant )
(182 Points)
Replied 30 November 2009
Yup treatment specified by shashi is perfectly proper and sunali has appropriately picked the sections in which it vl b taxable...
Pratik
(Articleship)
(37 Points)
Replied 30 November 2009
As you have claimed depreciation it will be charged as STCG. For the reference i am attatching herewith the Section 50 of IT Act, 1961
Shashi Bhushan
(Learner, Jalandhar)
(996 Points)
Replied 30 November 2009
| Originally posted by :Þräßéêr | ||
| " | Dear Mr. Shashi can you please explain your answer. | " |
Claiming Depreciation means it is used for business or profession.
in case of capital gain on depreciable asset used for b & p sale value of asset sold will be deducted from value of block.
and any gain/loss arising will always be short term capital gain wheather asset used for more than 36 months or not.
Land is not depreciable asset so Long term capital gain will arise as period of holding land is more than 36 months.
both of them must be appearing at different different value in Balance Sheet.
so cost of land and WDV of building can be easily known.
and for the value of sale consideration if not seperable Fair market value of Land will be the sale consideration for Land and remaining will be the sale consideration of the building.
if you need further explanation you can tell.
devang
(Article)
(66 Points)
Replied 30 November 2009
ya.... both sunali and Shashi are right...!!!!
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