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CAPITAL GAIN when cost of acquisition is unknown

samir ghosh (C.A student) (66 Points)

17 July 2011

I have got a gold ornament at the time of my marriage ceremony by way of GIFT.

I dont know what is the cost to the previous owner. The previous owner of the ornament didnt obviously give me the cash memo. Now I am going to sell the ornament. What will be the cost of acquisition u/s 49(1) for the purpose of computing Capital Gain?

I have purchased another Gold ornament in june 2007. But I lost the cash memo. I dont even remember the cost of the ornament. Now I want to sell the ornament in 2011. What will be the cost of acquisition u/s 48 for the purpose of computing Capital Gain? Please Help me .

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7 Replies

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 17 July 2011

get valuation done by authorized valuer as on 01-04-2000 and calculate capital gain from there.

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Bhavi ( CA) (82 Points)
Replied 17 July 2011

Samir, i suppose the valuer might not issue a valuation certificate for a back date.

My advice : You can refer to the Bullion market published issue prices for the year of acquisition ( The bullion market every year presents the rate of gold ) you can find the list since 1984 on any website. Such value can be taken as a base since it is refered to by even the ITOs.

Also it is a better option then to go in for a random amount. If at all the case comes up for scrutiny the chances that the ITO may refer the valuation of gold to the valuation officer are very very meagre. The actual cost might be less but the difference can definetely cannot be much ( if you opt for the bullion market published prices). Also they would not want to do so much excersise for a small amount.

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Chinnappan D M (Consultant) (96 Points)
Replied 17 July 2011

I have constructed a house to claim exemtion under sec 54 towards Long Term capital Gain against sale of Housing property. The builder charged me the total cost for building Rs.54 lacs and I have spent Rs.5 lacs towards interior work before occupying the same. Can I claim the total amount of Rs.59 lacs (54+5)under Sec 54 or I can only claim 54 lacs as exemption. Can any one clarify this point please.

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 18 July 2011

Originally posted by : Chinnappan D M
	I have constructed a house to claim exemtion under sec 54 towards Long Term capital Gain against sale of Housing property. The builder charged me the total cost for building 54 lacs and I have spent 5 lacs towards interior work before occupying the same. Can I claim the total amount of 59 lacs (54+5)under Sec 54 or I can only claim 54 lacs as exemption. Can any one clarify this point please.

check your previous year balance sheets, where you have acquired new furnitures, and allocation of funds towards fixed assets, if everything is mentioned and you preserve the documents for acquisition of furnitures in home, then there is no prob to add these as cost of property, but in absence of these, it can not be claimed.

Chinnappan D M (Consultant) (96 Points)
Replied 18 July 2011

Thanks Mr Sharma,

But since it is new construction and I have bills for putting falls ceiling, wood work, modular kitchen, Grill gates for the entrance, balconys, Electrical light fillings and other interiors etc which are not covered under the construction agreement of the builder.. All of them are done afresh and I have bills for them. Please clarify whether I can add these expenses to the original cost of the flat to claim exemption under Sec.54

Thank you once again for your swift response.

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U S Sharma (glidor@gmail.com) (21056 Points)
Replied 18 July 2011

Originally posted by : Chinnappan D M
	Thanks Mr Sharma, But since it is new construction and I have bills for putting falls ceiling, wood work, modular kitchen, Grill gates for the entrance, balconys, Electrical light fillings and other interiors etc which are not covered under the construction agreement of the builder.. All of them are done afresh and I have bills for them. Please clarify whether I can add these expenses to the original cost of the flat to claim exemption under Sec.54 Thank you once again for your swift response.

as its new construction ............... you have to add the cost of finishing and make it capitalized for whole 54+5 Lacs ( keep vat/ service tax paid bills with you paid by cheque with calculation of 5 lacs spend on asset), lacs in 1st year of assessment with building

sec 54 appears after 36 months only from the date of last capitalization coz before 36 months no LTCG

Mohana Harish (AUDIT TEAM LEAD - CA FINAL) (468 Points)
Replied 08 August 2011

1) i too support bhavi, u cann't predict the cost . so it is expecte to quart some amount per gram rate, but not the more Rs 1500 per gram. Because price of the gold is increasing enormously day by day. Surely there will be long term capital gain from sale of such gold which was gifted at the time of your marriage.

2)similarly there will not be any exemption for purchaew of gold oranament or any king of goldagainst the sale made by u on such gold, as u get exemption u/s - 54 ( sale of resident house & purchasing of residence house ).3) the gain will be taxed at the rate of 20% ( after availing indexation ) , if indexation is not use it will be taxed @ 10% on ifference amount ( Sale value - purchase value ( after ascertaining the value by authorised valuer ).

T.S.Mohana Harish , Ca student , Madurai - 9944361015.