Calculation of capital gain

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idris (Querist)

29 November 2011 Calculation of Capital Gain. When Land on which a new building is constructed is sold to a single person under two different agreements, i.e. one for Land and other for Building.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

30 November 2011 You may wait for expert opinion in this regard. However, what I think is that, the Property in question is a single and inseparable property. The land on which house is erected is not having its own existence. The two assets can be said to be a single asset.
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The rebuilding process is naturally an improvement and the cost incurred for the same may be treated as so.
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The character of the property in the hands of the assessee, thus remains as LT Capital Asset.
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The value of the erstwhile structure as on 1.4.1981 or cost, whichever is higher can be treated as the cost of acquisition and may be indexed accordingly for the purpose of computing capital gains.
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The cost of improvement can also be indexed with reference to the year in which such cost has been incurred and can be added to the indexed cost of acquisition.
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The sales consideration of land and re-built structure will form a composite sales consideration and the resulting capital gain, thus, will be LTCG only.

idris

idris (Querist)

03 December 2011 But the assessee has sold in two different agreements

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