| QUERY: | Amount paid to tenants for vacating the house against compensation (Pagidi). Can I treat the entire compensation which was paid to the tenant while calculating capital gains ? |
| ANSWER: | Click here to read the full answer of the expert |
| EXPERT: | CA. H. N. Motiwalla |
| SECTION(S): | 48, 55 |
| GENRE: | Capital gains – Computation - S. 55, Taxation (Domestic) |
| CATCH WORDS: |
Amount paid to tenants for vacating the house can be deducted while calculating capital gains tax under section 48 of the Act.
| 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: | Click here to read the full answer of the expert |
| EXPERT: | CA. H. N. Motiwalla |
| SECTION(S): | 118, 45, 48, 49(1) |
| GENRE: | Taxation (Domestic) |
| CATCH WORDS: | Capital gains – Computation -Land for land allotment by local authority |
The term ‘exchange’ has been specifically defined in section 118 of the Transfer of Property Act,
| QUERY: | P. Pvt. Ltd. wants to convert its status to status of Limited Liability Partnership (LLP), for which it has submitted that its total turnover is less than Rs. 60,00,000/- and total value of the assets does not exceed Rs. 5,00,00,000/- as appearing in the audited books of account of last three previous years. How to covert status of Pvt. Co. into LLP without any tax implication as the word “value” appearing in sub clause (ea) of clause (xiiib) of section 47 means “Fair Market Value” or “book value”? |
| ANSWER: | Click here to read the full answer of the expert |
| EXPERT: | CA. H. N. Motiwalla |
| SECTION(S): | 47(xiiib) |
| GENRE: | Taxation (Domestic) |
| CATCH WORDS: | Conversion of Pvt. Ltd. to LLP |
Chapter IV E – of the Income-tax Act, 1961 provide for “ Capital Gains”, which inter alia states for Transactions not regarded as transfer”.
| QUERY: | If a land owner transfers his land to a Developer through Development Agreement can he treat capital gain in the year in which respective allotted unit is sold before the date of completion certificate? Does it make any difference if and owner books one house/unit in new scheme developed by Developer? |
| ANSWER: | Click here to read the full answer of the expert |
| EXPERT: | CA. H. N. Motiwalla |
| SECTION(S): | 45(5A) |
| GENRE: | Taxation (Domestic) |
| CATCH WORDS: | Capital gains- Joint development agreement -What is Joint Development Agreement u/s. 45(5A)? |
Joint Development Agreement has not been defined under the Income-tax Act, 1961. However, the Finance Act, 2017 has introduced new sub-section (5A) in section 45 which defines ‘specified agreement’; which is similar to Joint Development Agreement.
| QUERY: | What shall be the tax implications (LTCG), on sale of shares: a) Purchased / acquired by gift / allotment / purchase before October 1, 2004 where no STT was paid (it was not through a stock exchange). b) Acquired before October 1, 2004 by purchase through broker from recognized stock exchange. No STT was paid. c) Shares acquired after October 1, 2004 through off market purchase or gift but no STT was paid. d) Purchase / acquisition before October 1, 2004 through IPO’s / FPOs/ Bonus issue / Right issue by company are eligible for exemption u/s. 10(38) though no STT was paid as there was no share transaction). Sale of shares shall invite LTCG after availing indexation benefit. |
| ANSWER: | Click here to read the full answer of the expert |
| EXPERT: | CA. H. N. Motiwalla |
| SECTION(S): | 10, 45 |
| GENRE: | Taxation (Domestic) |
| CATCH WORDS: | Capital gains-Long Term Capital Gains on sale of shares etc. |
So in queries (a) and (b) purchased / acquired before October 1, 2004, the transaction would be chargeable as LTCG @ 20%. In case of query (c) purchased before October 1, 2004 off market where no STT was paid would also be chargeable as LTCG @ 20%. In case of query (d) from the facts, it is liable as LTCG @ 20%. However, as per explanatory memorandum, it has been indicated that purchase through IPO, FPO bonus or right issue by a listed company, acquisition by non-resident as per FDI policy etc., may be exempt, which means others are liable to tax.
| QUERY: | A flat booked in 2013 and paid the amount in installments since then. First payment and registration done in 2017. Possession given in 2017 on registration though almost full payment was given on allotment in 2013 and subsequent installments paid between 2013 & 2016. What will be the date of acquisition for taxation of capital gains & indexation of payment? |
| ANSWER: | Click here to read the full answer of the expert |
| EXPERT: | CA. H. N. Motiwalla |
| SECTION(S): | 45 |
| GENRE: | Taxation (Domestic) |
| CATCH WORDS: | Capital gains- Date of acquisition – Amount paid in installments |
The Bombay High Court in CIT v. Mrs. Hill J. B. Wadia [216 ITR 376] has observed that “what we have to see is whether the assessee has acquired a right to a specific flat in such a building which is being constructed by the builders / society and whether he has made substantial investment within the prescribed period which will entitle him to obtain possession of the flat so constructed and in which he intends to reside. The material test in this connection is domain over the flat and investment in it”. So, on the basis of the fact that querist has invested substantial amount in 2013, though possession and registration was in 2017, the date of acquisition would be 2013 for taxation of capital gains.
| QUERY: | Assessee falls under the definition of “eligible assessee” as provided in Explanation (a) to section 44AD. His turnover is not exceeding one crore rupees (taking into consideration positive & negative figures). Assessee maintains regular books of account. Assessee has incurred speculation loss of Rs. 5,00,000/- on share trading, which he wants to carry forward and assessee has incurred business loss of Rs. 3,00,000/- in an eligible transaction in respect of trading in derivatives as provided in section 43(5)(d) & (e), which he wants to set-off against income from other sources. In this connection assessee has the following question, (i) Will speculation business & business carried out in eligible transaction in respect of trading in derivatives as provided in section 43(5)(d) & (e) be treated as “eligible business” as provided in Explanation (b) to section 44AD. (ii) If yes, will it be necessary to carry out Audit u/s. 44AD to carry forward speculation loss & set-off business loss in the case of above facts? |
| ANSWER: | Click here to read the full answer of the expert |
| EXPERT: | CA. H. N. Motiwalla |
| SECTION(S): | 43(5)(d) & (e), 44AD |
| GENRE: | Taxation (Domestic) |
| CATCH WORDS: | Presumptive taxation-Eligible assessee |
As per Explanation 2 of section 28 of the Act, the speculative business is distinct from any other business. So speculation business is a separate business from eligible transaction as defined in Explanation 2 to section 43(5).
| QUERY: | A is having salary of about Rs. 30 lakhs. He has also done F & O transactions in shares. As per guidance note on tax audit of ICAI total of favourable and unfavourable differences shall be taken as turnover in F & O transaction. For A.Y. 2013-14 favourable difference is 80 lakhs and unfavourable difference is 10 lakhs, hence, A has paid income tax on Rs. 70 lakhs. Whether A is required to maintain books of account and get tax audit or can A claim that he does not maintain books of account, and offer business income @ 8% of Rs. 70 lakhs as per section 44AD? |
| ANSWER: | Click here to read the full answer of the expert |
| EXPERT: | CA. H. N. Motiwalla |
| SECTION(S): | 44AB, 44AD |
| GENRE: | Taxation (Domestic) |
| CATCH WORDS: | Audit of accounts – Business – Profession - Limit of F & O transactions for tax audit |
The Guidance Note on Tax Audit under section 44AB of the Income-tax Act, 1961 states that in case of Derivatives, Futurer and options the difference between total favourable and unfavorable is to be considered as turnover for the purpose of deciding the limit under section 44AB of the Act.
| QUERY: | A is having four tank lorries. He submits his Income-tax Return under presumptive scheme u/s. 44AE. Whether he can pay amount up to rupees two lakh in cash for his high speed diesel (HSD) bills? |
| ANSWER: | Click here to read the full answer of the expert |
| EXPERT: | CA. H. N. Motiwalla |
| SECTION(S): | 44AE |
| GENRE: | Taxation (Domestic) |
| CATCH WORDS: | Goods carriages -Computation provisions are not applicable when presumptive income is adopted u/s. 44AE |
Section 44AE with non obstante clause to ensure that computation provisions do not have application. Hence section 40A(3) and (3A) will have no application. Therefore, where presumptive income is adopted, the question of judging the correctness of expenses cannot arise
| QUERY: | Whether “tuition fees” is an income from business, profession or vocation and whether such income is covered u/s. 44ADA? |
| ANSWER: | Click here to read the full answer of the expert |
| EXPERT: | CA. H. N. Motiwalla |
| SECTION(S): | 44ADA |
| GENRE: | Taxation (Domestic) |
| CATCH WORDS: | Presumptive taxation- Profession -Tuition Fees – Whether covered u/s. 44ADA |
The heading of section 44ADA is “Special provision for computing profits and gains of profession on presumptive basis”. Section 2(36) defines “Profession” includes vocation So, ibid, section has defined profession very widely. The word “vocation” has been defined in Corpus Juris secundm, as calling, occupation or trade one’s regular calling or business, a calling or occupation or business in which one engages more or less regularly in the activity upon which a person spends the major portion of his time and out of which he makes his living, that to which one is called by some special fitness or sense of duty. But section 44ADA is applicable only to a person who is engaged in profession referred to in section 44AA.
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