Mr. X has a Land which was purchased by him in 1975. After few years a Staff Quarter was built. Whether such Staff Quarter will be treated as cost improvement or be included in the value of the Land?
Regards,
Devendra Kulkarni
22 Replies
TRIYAMBAK PATRO
(IPCC STUDENT)
(71 Points)
Replied 11 August 2012
IF THIS IS BEFORE 1/4/81 THEN COI IS IGNORED.IF IT IS AFTER 1/4/81 THEN IT IS INDEXED IN FOLLOWING MANNER
COI * CII OF YR OF TRANSFER /100
Mohd Ikramullah
(Student)
(32 Points)
Replied 12 August 2012
It will treated as cost of improvement only if it is constructed after 1-4-81.
If before 1-4-81 then it should be ignored
Manjunatha M K
(Manager - Accounts)
(318 Points)
Replied 12 August 2012
Dear Devendra,
By looking at your problem it looks like, it is related to business (because Staff Quarter built).
For income tax purpose Land is separe asset (Depreciation is not available) and building is separate asset (Depreciation Available).
So, you have to calculate the cost accordingly.
Building is depreciable asset, hence STCG (CG should be calculated on block of Asset)
Land is LTCG (Cost can be taken is: Actual cost of market value on 01/04/1981 whichever is beneficial)
bcshettyco
(Chartered Accountant In Practice)
(65 Points)
Replied 12 August 2012
COI prior 1981 is nil.
CA HIMANSHU
(ARTICLE)
(317 Points)
Replied 13 August 2012
no it shall be cost of building refer case CIT VS CR SUBRAMANIAN
Harsh Sarawgi
(Practice)
(21 Points)
Replied 13 August 2012
The Cost of improvement before 1/4/1981 is to be ignored. Hence the fair value of the land along with the building is to be taken as on 1/04/1981 if the same was contructed before the said date.
If however the staff quarter was made after 1/04/1981, it is to be treated as cost of improvement and indexed accordingly if it is for the purpose of sale.
CA PRAVEEN SINGH
(MANAGER ACCOUNTS)
(2277 Points)
Replied 13 August 2012
IT WILL BE COST OF IMPROVEMENT ...
PRIOR 1981 VALUE WILL BE NILL.....
yuvak
(Practising CA)
(144 Points)
Replied 13 August 2012
Respected professionals,
My thoughts is that 'Staff Quarters' will be treated as a seperate asset (both for accounting and IT purpose). Therefore, building will be depreciable asset taxable as STerm and Land as LTerm.
Cheers
MANVI ARORA
(STUDENT)
(21 Points)
Replied 13 August 2012
no as per c.r. subhrmaniam case it shd be seprately assessed as coa for building,becoz it is done on land as a part of construction.
Aravind..
(CA)
(1262 Points)
Replied 13 August 2012
It is better to treat as separate assets. If the building is used by a business then depreciation will be claimed and it will be a short term capital gain, that arises out of sale of building portion.
While selling the asset wholly, land and building, valuation is separately required.
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