|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.
|EXPERT:||CA. H. N. Motiwalla|
|SECTION(S):||118, 45, 48, 49(1)|
|CATCH WORDS:||Capital gains – Computation -Land for land allotment by local authority|
Opinion Of Eminent Legal Luminaries On Controversial Issues
Credit: Several of the queries and answers are reproduced with permission from the AIFTP Journal. We thank AIFTP for generously allowing us to host their research material.
Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. Neither the author nor itatonline.org and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon. No part of this document should be distributed or copied (except for personal, non-commercial use) without express written permission of itatonline.org