Capital asset transfer to stock in trade (land)
This query is : Resolved
10 February 2014
Sir
My Claint ITR-2 Return filed upto Asst.Yr 2012-13. He purchased 1 acre Agricultural land Value Rs. 5,00,000/- on Asst.year 2012-13. For the Asst. year 2013-14, the above agri land converted to Real Estate business (10 sites) and 2 sites sold duing the asst. year.
My question: 1. The above income is capital gain or treated as Income from Business.
Q 2: If Business means, Agri Land transfer to Stock in trade is Correct or not.
Q 3: Is Correct, Transfer Value Increase Rs.5,00,000/ to i.e. Rs. 8,00,000/- difference Rs. 3,00,000/ is Short tarm Capital gain is correct or not.
Q4 : What is the correct way Income from Business or Capital gain.
My Claint ITR-2 Return filed upto Asst.Yr 2012-13. He purchased 1 acre Agricultural land Value Rs. 5,00,000/- on Asst.year 2012-13. For the Asst. year 2013-14, the above agri land converted to Real Estate business (10 sites) and 2 sites sold duing the asst. year.
My question: 1. The above income is capital gain or treated as Income from Business.
Q 2: If Business means, Agri Land transfer to Stock in trade is Correct or not.
Q 3: Is Correct, Transfer Value Increase Rs.5,00,000/ to i.e. Rs. 8,00,000/- difference Rs. 3,00,000/ is Short tarm Capital gain is correct or not.
Q4 : What is the correct way Income from Business or Capital gain.
10 February 2014
As your client has filed ITR 2 no balance sheet has been filed along with the return.
.
It means the intention of the client was clear. He purchased the land as a capital asset as the said land had not been shown as stock in trade in AY 2012-13. He did not filed ITR 4/4S
.
The market value on the conversion date will be treated as sales consideration for the purpose of computation of capital gains. So as per Q 3 if FMV is 800000/- you are correct in asserting that Rs 300000/ will be the amount of STCG. However, entire amount will not be taxed in AY 2013-14. Only 2/10th amount will be taxed as STCG.
.
As and when the sites will be sold proportionate capital gain amount can be shown as STCG in the corresponding AY of Sale of each site.
.
800000+ conversion expenditure will be the value of the stock. Say 250000. So 10 sites of equal size costs @ 1050000/10=105000/-per site.
.
Business profit can be ascertained on the basis of proportionate area sold. Assuming all the sites to be equal in area and sold for Rs. 200000 and 225000, business profit for the AY will be Rs 425000-105000*2
.
It means the intention of the client was clear. He purchased the land as a capital asset as the said land had not been shown as stock in trade in AY 2012-13. He did not filed ITR 4/4S
.
The market value on the conversion date will be treated as sales consideration for the purpose of computation of capital gains. So as per Q 3 if FMV is 800000/- you are correct in asserting that Rs 300000/ will be the amount of STCG. However, entire amount will not be taxed in AY 2013-14. Only 2/10th amount will be taxed as STCG.
.
As and when the sites will be sold proportionate capital gain amount can be shown as STCG in the corresponding AY of Sale of each site.
.
800000+ conversion expenditure will be the value of the stock. Say 250000. So 10 sites of equal size costs @ 1050000/10=105000/-per site.
.
Business profit can be ascertained on the basis of proportionate area sold. Assuming all the sites to be equal in area and sold for Rs. 200000 and 225000, business profit for the AY will be Rs 425000-105000*2
17 February 2014
Thank You Sir,
Now I am select ITR 2 or ITR 4/4S.
Now I am select ITR 2 or ITR 4/4S.
17 February 2014
You may consider the income as Capital gains and can file ITR 2 also.
.
.
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