Capital gain

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

12 September 2016 A company "X" sold a land to Company "Y" in 2005. Company Y made the payment through cheque and the capital gain also booked by Company X. That time let us assume that the guideline was Rs 300 and the payment made by company Y to Company X is Rs 30,00,000/-. Now in 2016, for some reasons, they wish to cancel the registry of the land which had been then done with registrar in the name of Company Y. The present guideline is Rs 800 Company X intends to return Rs 30,00,000/- now and get the registry cancelled. This means by getting the registry cancelled and returning the same amount, Company X will regain the possession of asset sold.

Question is whether there be any capital gains tax arising to Company Y? Though the guideline has increased but it is not selling the land. It is by way of cancellation of a previous regitered document.

Amol S Joglekar

Amol S Joglekar (Expert)

12 September 2016 How? 2005 transaction.....cancellation.....Not possible....
At the most Co X can repurchase the said land and as per section 50C, stamp duty value shall be regarded to be the full value of consideration (I think you are using the word GUIDELINE for stamp duty value....right?)

Querist : Anonymous

Querist : Anonymous (Querist)

12 September 2016 Thanks Sir. Sir, Stamp Duty is used for Guideline as well as Capital Gain calculation. I agree with you that the transaction of 2005 being cancelled in 2016 does not look logical. But, for the time being, if we assume that the registrar is ready to cancel the said registry, would there be capital gain tax in the hands of Y, when it receives the same amount what was paid in 2005 while the guideline has increased now.?.

Amol S Joglekar

Amol S Joglekar (Expert)

13 September 2016 For hypothetical cases one need NOT try to apply the FACTUAL laws.
Anyway, if at all what you are asking happens to be in reality AND as per the litraligis of the query,
Cancellation deed does NOT attract any capital gain.
(The income tax return of the year in which the Co X booked and offered the then capital gain for taxation, should be REVISED.......subsequent to that all the subsequent years' income tax return may CALL for revision)

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