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Tax on sale of Factory Land & Building

Jignesh (Service) (42 Points)

31 May 2010

Dear All,

We had a factory land in Navi Mumbai, which was acquired in 1997. the cost of the land was Rs. 1 Cr. and then the factory building was build at the cost of Rs. 90 L.

It depriciated value os Rs. 45L.

Today if we sale the land & building will the profit be taxable and if we reinvest the entire amount in another factory plot & building will it be taxable.

Please guide me appropriately.

Regards

Jignesh Patel

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4 Replies

Amir (Learner) (4016 Points)
Replied 02 June 2010

Dear Jignesh,

The sale consideration is required to be split between two parts. One pertaing to Land & Other pertaing to Building. {Certificate from Govt. approved or registered valuer will do}

The "Building portion" of sale consideration will be reduced from the Block in terms of Sec 50.If Closing WDV is positive & there are other asset in the Block then no treatment under capital gain is required to be done. Otherwise Capital gains will arise nevertheless the same can be claimed exempt u/s 54EC.

The "land portion" of sale consideration will be dealth with Sec 48. (Benefit of Indexation of cost shall be allowed) - Any gain can be claimed exempt u/s 54EC

MAXIMUM AMOUNT THAT CAN BE CLAIMED U/S 54EC IN ANY FY IS 50 LACS BY MAKING INVESTMENT IN THE REC / NHAI BONDS.

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kantijain (Chartered Accountant in Practice) (385 Points)
Replied 02 June 2010

Dear Jignesh,

I agree with amir view, only addition i will like to make is that in case there is no other building than the excess of sale consideration over wdv will be treated as short term capital gain u/s 50. Also there is a mechanism wherein if the sale is within 6 months of the end of the financial year than the exemption u/s 54EC can be claimed upto Rs. 1 Crore by investing twice Rs.50 Lac in 2 different financial year, i hope u got my point or else contact any professional CA to help u out.

Regards

Kanti jain

ABID Maredia (T) (33 Points)
Replied 24 November 2018

What would be the case if assessee is a PVT Ltd Company? What options are available to tax Tax?

Assessee is a PVT Ltd Company. It has land & building in Tamilnadu. It is winding up the operations in Tamilnadu & transferring all the assets to a new PVT Ltd Company in Gujarat doing the same business. Shareholding pattern is same in both the companies. There is a capital gain on transfer of land & building. What is the way to reduce tax liabilitiy?

Nikhil Kaushik (Fellow CA) (85547 Points)
Replied 24 November 2018

Originally posted by : ABID Maredia
	What would be the case if assessee is a PVT Ltd Company? What options are available to tax Tax? Assessee is a PVT Ltd Company. It has land & building in Tamilnadu. It is winding up the operations in Tamilnadu & transferring all the assets to a new PVT Ltd Company in Gujarat doing the same business. Shareholding pattern is same in both the companies. There is a capital gain on transfer of land & building. What is the way to reduce tax liabilitiy?