Dr. Paras Jain (Chartered Accountant) (1238 Points)
19 August 2010Friends ! here is really a teaser!!
A tenant in occupation of a shop premises for more than two decades paying monthly rent of Rs. 100 gets a brand new shop from a builder, who develops the building. Fair Market Value of the new shop is Rs. 1 Cr..
Is there any liability for capital gain tax ??
Dr. Paras Jain
(Chartered Accountant)
(1238 Points)
Replied 19 August 2010
My arguments are :
Teant surrenders his tenancy rights. Extinguishment of tenanct rights is "
Transfer" Cost of acquisitiion is nil.
There is a separate agreement for SHOP. In any case the shop is a new asset.
Tenancy right per se is not depreciable asset. Rent is covered U/s 30.
S. 50 benefiit is also ruled out.
Therefore FMV of new shop 1 Cr is fully liable to tax as LCG
Ankit Agarwalla
(CA)
(281 Points)
Replied 21 August 2010
Sir,
Has the tenant vacated the premises?
If no, there would be no transfer if he simply gets a renovated premise.
however if the tenant is given a new shop at some other place, then it will come under transfer of tenancy right, as you already mentioned and the whole of FMV of the new asset will be taxable as LTCG.
That is what I think.
Regards
Dr. Paras Jain
(Chartered Accountant)
(1238 Points)
Replied 22 August 2010
For redevelpment , Property has to be vacated, demolished and reconstructed. There is new plan, new name, new premises new marketing.
Old property is TENANCY RIGHTS which are diffrent from shop .
TENANCY RIGHT extingushed and NEW ownership right in brand new shop is altigether a nrwe ight.
It ie therefore exchange ( Te Cairns india Ltd)
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