Search Results For: capital gains


QUERY: Mr. ‘A’ is filing his Income Tax Return regularly. He acquired an agricultural land by way of partition effected by his father on 29-7-2007.

The partition is effected by father of ‘A’ and as per said partition, the property is partitioned among ‘A’ and his brother ‘B’.

Actually, father of ‘A’ had acquired this agricultural land by way of a partition deed effected by his grandfather on 21-12-1976 and further grand-father had acquired this property by way of gift alongwith father of ‘A’, Grandmother of ‘A’ and his brother ‘C’, from the father-in-law of grandfather on 4-5-1953. In short this property is gifted by father-in-law of grandfather to all of them.

In the circumstances, your valuable opinion alongwith case laws is solicited in the matter as to whether finally property fell in the hands of ‘A’ is his individual property or property of his H.U.F.

Now, this property is compulsorily acquired by the Government for constructing offices on said property for functioning the Governmental works.

In lieu of acquisition of this property, Mr. ‘A’ had received compensation from Government by way of consent agreement entered into with the Government.

Mr. ‘A’ received compensation, which consists of cost of land, solatium and compensation for loss caused to ‘A’. The loss is calculated by the Government from the date of notification to the date of Award by the Authority.

The above amount of cost of land, solatium and compensation for loss as mentioned above, have been received by way of consent Award executed between ‘A’ and the State Government.

Further as mentioned earlier, the property is an agricultural land situated in a village, which is beyond 8 Kms. from Muncipal Area and the same has been compulsorily acquired by Government for constructing office buildings etc. for the purpose of Government work.

In view of this, whether the compensation so received in the nature of cost of land, solatium and compensation for loss, is chargeable to Income Tax or not?
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As per the query, the father-in-law of the grandfather had gifted property for the benefit of the grandfather alongwith father of ‘A’, grandmother of ‘A’ and his brother ‘C’ on May 04, 1953. Thus, it can be presumed that the property was gifted to the HUF of the grandfather, if intention of the donor was to gift the property for the benefit of HUF of grandfather of ‘A’. (See C. M. Arunachala vs. Muruganatha – AIR 1953 SC 445).

QUERY: In case of redevelopment of property the consideration takes in the form of corpus, which is a real cash inflow and fair market value of the property to be developed, which is a deemed consideration for the purpose of exchange. Thus, there is exchange of property. Now, the question is in which year capital gain arises and when can exemption be claimed either under Section 54 or under section 54F?
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In case of development of property the capital gain arises as per terms of the agreement. Generally, the agreement provides that the developer has right to enter and construct on the land of owner and owner parts with land only on receipt of certain portion of building to be constructed

QUERY: ‘P’ had to sold her property in order to finance her daughter’s medical expenses.

The agreement for sale was entered for Rs. 50/- lakh. She received only Rs. 35/- lakh due to dispute with the buyer. No possession of the property was given. She does not have money to invest in order to claim exemption u/s. 54. The AO passed the order levying tax on Rs. 50/- lakh. Whether AO is right?
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In this case transfer is not complete, because of property has not been given and therefore there is no question of investing in another house to claim exemption under section 54

QUERY: ‘A’ has purchased a plot in March, 2010 for Rs. 10/- lakh and spent Rs. 5/- lakh for construction during F.Y. 2011-12, and Rs. 5/- lakh during the F. Y. 2012-13. He sold the entire house in December, 2014 for Rs. 50 /- lakh Whether it is long-term or short-term gain?
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Section 2(29A) defines “Long term capital asset” which means a capital asset which is not a short term capital asset. Section 2 (42A) defines “Short term capital asset” which means a capital asset held by an assessee for not more than thirty six months, other than listed shares. In that case, a period of not more than the twelve months to be considered for short term capital asset

QUERY: The assessee sold residential house and planned to construct a new house for claiming exemption u/s. 54. The assessee expired in April, 2014. Can legal heir who has to file Return of Income can claim benefit u/s. 54 of the Act, and how?
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Thus, it is clear from the above judgments that legal heir steps in the shoes of deceased and entitled for deduction under section 54 of the Act.

QUERY: A flat was sold. The AO adopted stamp duty value. The assessee invested full stamp duty value in another flat. Whether the assessee is entitled for deduction under section 54F?
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where capital gain is assessed on notional basis under section 50C, whatever amount is invested in new residential house within prescribed period under section 54F would get benefit of deduction irrespective of the fact that funds from other sources are utilised for new residential house

QUERY: I sold my residential property and made a long-term capital gain of Rs. 50 lakhs. I used the sale proceeds to purchase a commercial gala. Subsequently, within two years of sale of the residential property, I purchased another residential property by borrowing funds from the bank and relatives. Can I claim that the long-term capital gain is exempt u/s 54 even though the sale proceeds of the old house were not used for purchase of the new house?
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No! The only requirement for availing deduction u/s 54 is that the new residential house must be purchased or constructed within the period specified in the section. The source of funds is irrelevant.

QUERY: We have been approached by a builder for the redevelopment of our building. He says he will demolish parts of the building and reconstruct with more area. The society will be paid Rs. 1 crore while the members will be paid Rs. 25 lakhs each. He will retain a part of the area as his profit. Are the said sums chargeable to tax in the hands of the society and members?
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No. If no ‘cost of acquisition’ is attributable to the development rights, the gains arising on their transfer are not assessable in either the hands of the society or in the hands of the members.

QUERY: I am holding some shares for investment purposes and other shares for trading. I have made gains from the investment shares. Is the AO correct in treating the gains as business income?
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No! One has to be careful to ensure that there is a proper segregation of the shares held on investment account from the shares held on trading account. The investment shares must be valued at cost while the trading shares can be valued at market price if that is lower.

QUERY: We are carrying on real estate business and hold land at stock-in-trade. The land cost us Rs. 50 lakhs. It is worth Rs. 2 crores today. We propose to revalue the land at its market value in the books of account and credit Rs. 1.50 crores to the P & L A/c. We shall introduce the land as our capital contribution in a firm in which we will become partners. The firm will credit our capital account by Rs. 2 crores. Are we taxable on the difference between Rs. 50 lakhs and Rs. 2 crores?
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Yes! As per the judgement of the majority in the Special Bench in DLF Universal vs. JCIT, stock-in-trade gets converted into a capital asset at the point of introduction into the firm and attracts s. 45(3).