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Long term capital gains

Bhavana Asthana (chartered accountant) (30 Points)

17 November 2011

Hello!

I have a query to share with my esteemed fraternity.

My clent's father has inherited a property on oral partition.He has approached a developer for construction of flats.

The development agreement is a triparty agreement between client's father,developer and client (along with the sibblings)for the share in flats by virtue my client becomes the owner .My clients wants to sell her flat.

points to ponder for calculation is

Partition had happened in 1976 (father and son)

Development agreement in 1991( tripaty)

Now the question is what is the COA and improvement for calculation of LTCG

Thanks

CA Bhavana Asthana

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6 Replies

Vikas (CA) (1135 Points)
Replied 17 November 2011

hi bhavna...it is advisable for the family members to prepare an MOU explaining share in property....n....for COA ....the COA in case of inheritence is 0 for recipient hence the cost in the gands for original owner will b taken i.e. if the property by the father if was purchased bfore 1-4-81 then the valuation shall b done and according the indexed cost can b calculated n thrn divided into the share of the members...same would apply in case of improvement cost...

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Vikas (CA) (1135 Points)
Replied 18 November 2011

hope i have clarified the doubts...

CA Hardik Bunha (self) (2121 Points)
Replied 18 November 2011

COA will be previous owner's cost and when this flat want to sell then for indexation index cost will be 100. u have a option for CoA that cost of previous owner OR cost on 01/04/1981 whichever is higher.

Bhavana Asthana (chartered accountant) (30 Points)
Replied 18 November 2011

Thanks for thr response.I would further like tu konw that in my case thre are two cost involved

COA in the hands of grand father ie 1-4-1980

and secondly cost of relingushment in the hands of father of his share to the developer for building the flat for my client.Can I take a notional cost of similar flat in the same building as cost of improvement /COA ise

Please advise

Thanks

CA Bhavana Asthana

Vikas (CA) (1135 Points)
Replied 19 November 2011

already the ans is given for COA as for value in 1980 relinquishment exp needs more clarification...as to why incurred...

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Bhavana Asthana (chartered accountant) (30 Points)
Replied 19 November 2011

Hi Vikas

The property of the grand father was converted into flats through the development. Suppose there agreement is 50:50 basis. Father is religuishing the 50% land as a consideration for construction of the 4 flats . Out of which my client has received the flat which he is selling.

Now the point is there is change in the property transfered from gf to father. Can this be taken as Cost of improvement. ? what should be the valuation? Do we have any citation in such case?

Please discuss

Thanks

CA Bhavana Asthana