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capital gain

V.S.Rajagopalan (Consultant) (40 Points)

12 January 2010

A property was purchased by A in 1992 for Rs. 11000/- and was gifted to his mother in 2005 by a settlement deed. mother sells it to a builder in 2008 for Rs 670000/- but realises the sale value from 2008 to 2009 in instalments. what is the capital gain tax. Property still not registered nor possession given to the builder.

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3 Replies

Hareesh H Sharma (Cleared IPCC..now article) (894 Points)
Replied 12 January 2010

Sir,

Capital gains arises in the year of transfer

And transfer according to sec 2(47) of IT act means

(i) the sale, exchange or relinquishment of the asset ; or

(ii) the extinguishment of any rights therein; or

(iii) the compulsory acquisition thereof under any law ; or

(iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment or

(v) any transaction involving the allowing of 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, 1882 (4 of 1882) ; or

(vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immov-able property.

So i hope it will be taxed in the year it was sold even though consideration was received later..Tax will be calculated on 670000 in the year when it was sold by her...

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Pradip Srinivasan (CA Final) (869 Points)
Replied 13 January 2010

S, capital gain wil b calculated on, Rs 670000 in the yr in which it is transferred.

Full consideration shld b taken in to Account, even though received in instalments.

Prity (Partner) (70 Points)
Replied 13 January 2010

Ya Hareesh & pradeep are right..

Capital gain will be on Rs. 6,70,000 in the year which the property is transferred since there is no cost of acqusition for the mother as the property is received as a gift.

As the income accrues in the year of transfer full consideration should be taken for the purpose of calculation of tax.