Capital gain query

Tax queries 893 views 6 replies

CA Suhas Prabhu

Chartered Accountant

159 Points Joined January 2010

Hi Members,

Happy Holi to all.

My query is regarding Capital Gains.

A land was compulsory acquired by NHAI ine assessee had acquired the land in 1980 for Rs F Y 2007-08. But the compensation was paid in the F Y 2012-13. The compensation received was Rs 20 lakhs. The assessee had acquired in 1980 for Rs. 25,000/-

Now my query is while computing Indexed Cost of Acquisition, the cost of Index of which year is to be taken for the same.

Is it F Y 2007-08 or F Y 2012-13.

The cost of index for 2007-08 is 551 & 2012-13 is 852.

Waiting for the responses from the learned members.

Replies (6)

CA Deepesh Ruhela

Keen to Learn

3271 Points Joined August 2010

Period of holding shall be taken upto the date when asset was compulsorily acquried. In your case, indexation upto FY 2007-08.

Happy Holi...

Regards

Deepesh Ruhela

CA Jatin Kacha

Chartered Accountant

230 Points Joined May 2011

Hello Suhas,

In your case,Capital gain is chargeable to tax in the previous year in which such compensation/consideration or part thereof is first received. Thus, capital gain is not chargeable on accrual basis. It is taxable on receipt basis.

Cost of acquisition to be deducted only in first computation: Where such compensation is received in installments, the cost of acquisition or cost of improvement is allowed to be deducted in full in the year of first computation on receipt basis. It is not to be apportioned over different installments.

This is as per the order of suprem court. The case is as under:

[Raina Bai v. CIT (1990)181 ITR 400(SC)].

Vargab Mukherjee

Articled Assistant

36 Points Joined March 2013

The cost inflation index of the FY 2007-08 shall be taken for computing the indexed value of the land that was compulsorily acquired by NHAI.

the capital gain shall be taxable in the year of the first reciept of the compensation amount, i.e. FY 2012-13, thereafter any and all compensation installments recieved shall be fully taxable without any indexation benefits.

CA Aditya Lahoti

Chartered Accountant

380 Points Joined April 2012

I Agree with above members.

Cost of Indexation should be taken of FY 2007-08

Happy Holi....!!!

Shivang Chokshi

C A

182 Points Joined April 2008

period of holding will be upto 2007-08 and capital gain will be calculated in ay when you receive the money or part of it for the first time.. thus indexation will only be up to 2007-08 as it is the year in which you have forgone your right over the land by transferring it. you will also need fmv as on 1981 for appropriate working as base index will be as on 1981 i.e. 100.

Aravind..

1262 Points Joined July 2009

In case of compulsory acquisition, the concept is simple. Compute capital gain when the capital asset was compulsorily acquired. Tax it on the date of receipt of initial compensation receipt.