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Capital gain nature

Tax queries 406 views 1 replies

CA Amol Gulavani

M Com ACA

106 Points Posted on 11 November 2013

A person owns a plot of land since last 28 years. He enters into an agreement with a builder to develop the plot. In return, builder agrees to give 3 residential flats to the land owner as consideration. (builder intends to create an apartment of the building constructed & hence the land owner will remain the owner of part of the land)

If the land owner sells the 3 flats immediately, will it be considered Short Term Capital Gain or Long Term Capital Gain?

please suggest relevant case laws, if any..

thanks

Replies (1)

Mihir

Wealth Manager

5293 Points Posted on 11 November 2013

The cost of acquisition for the land shall be the price paid for the land.

The sale consideration for the sale of land shall be the cost incurred by the builder to construct the flats which is agreed to be sold to you. Computing the above with indexation will give you the long term capital gain.

When these same flats are sold by you, the cost of acquisition for you shall be the cost incurred by the builder to construct your flat.

When you want to sell these flats before the end of 3 years, it shall be short term capital gain.