Opinion Of Eminent Legal Luminaries On Controversial Issues

Capital gains – Computation -Land for land allotment by local authority.[ S.45 ]

QUERY: Cost to be taken on the basis of original cost of land surrendered or the estimated value on the date of allotment? What should be the period of holding?
ANSWER: The term ‘exchange’ has been specifically defined in section 118 of the Transfer of Property Act, thus:
“When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing nor both the things being money only, the transaction is called ‘exchange”. So, “exchange” presupposes existence of different properties owned by different persons. As a result, the ownership of one property is transferred to the owner of other property and vice-versa”.
Further section 49(1) states that where the capital assets became the property of the assessee by “devolution” the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it. The expression ‘devolution’ has wider meaning in the context and includes not merely a succession on death but also a change of ownership from one living being or body to another.
Thus from the fact, it is clear that land was surrendered to the local authority in exchange of another land. The value at which the land was surrendered to be taken as a cost. If it is surrendered at cost, the cost to be considered.
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