Capital gain

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Querist : Anonymous

Querist : Anonymous (Querist)

08 July 2012 For Computing Capital Gain - Ancestor Property.
1. What will be the cost of acquisition?
2. Year From Which indexation apply?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

08 July 2012 The date of acquisition and period of holding will be considered in reference to the first ancestor who acquired the said property.
.
In case property is acquired prior to 1.4.1981, Fair Market value as on 1.4.1981
may be considered as the cost of acquisition and can be subjected to indexation w.r.to the FY 1981-82.
.

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Querist : Anonymous

Querist : Anonymous (Querist)

08 July 2012 For Computing Capital Gain - Ancestor Property.
Property acquired by previous owner in 1964 (by way of partition, 1981-FM Value Rs.5000). The ancestor died in 1996.

Property automatically transferred to his son in 1996. The property sold on May 2011, for Rs. 38 lcs. He invested in a

residential house on September 2010, value of Rs.4,80,000.

1. What will be the cost of acquisition?
2. Year From Which indexation apply?
3. Can the residential house purchased before sale be claimed?
4.Net capital gain

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)

09 July 2012 1. Cost of acquisition shall be the fair market value as on 1.4.1981.

2. Indexation will apply for FY 1981-82, i.e., 100.

3. Residential house, if purchased within 1 year before the date of sale, is eligible for exemption.

Since the new house has been purchased within the period of one year, it ie eligible for exemption

4. Net capital gain shall be computed as under:

Sale Consideration 38,00,000
Less: Expenses on transfer NIL
Less: Indexed cost of acquisition 5,000*785/100 = 39,250
Less: Indxed cost of improvement
CAPITAL GAIN 37,60,750
Less: Exemption u/s 54 4,80,000
Net Capital Gain 32,80,750

The above answer is based on the assumption that the asset sold is a residential house property.

If the asset is only land, then exemption will be available u/s 54F. The amount of exemption shall be Rs. 4,75,042 (4,80,000/38,00,000 * 37,60,750) and accordingly capital gain shall be Rs. 32,85,708

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Querist : Anonymous

Querist : Anonymous (Querist)

09 July 2012 SIR THANK YOU VERY MUCH.
BUT THERE IS SMALL DOUBT IN THIS REGARD .
THE INDEXATION SHOULD APPLY FROM THE YEAR IN WHICH PROPERTY WAS TRANSFERRED (ancestor property). IN THIS CASE THE PROPERTY TRANSFERRED YEAR IS 1996. I HAVE LITTLE BIT CONFUSION. FOR TAKING INDEXATION , PREVIOUS OWNERS HOLDING PERIOD HAVE TO INCLUDE OR NOT/.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)

09 July 2012 The Bombay High Court has held in the case of Majula J. Shah that where the assessee became the owner of the property by any of the means specified in Section 49(1), then indexation shall be considered for the year in which the previous owner acquired the property.

Refer CIT v. Manjula J. Shah 16 Taxman 42 (Bom.)

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Querist : Anonymous

Querist : Anonymous (Querist)

09 July 2012 SIR THANK YOU VERY MUCH.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)

09 July 2012 You are welcome.

Query resolved and closed.

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