Capital gain

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Sajanee Vakharia (Querist)
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09 June 2011 A property has been purchased by an assessee in the name of his son now as an assessee was unable to pay his bank installments that property is surrender by bank as payment of balance installments. Would he be subject to capital gain tax. If yes, please state in context of section and related Case law? Reply urgently.

CA MANOJ GUPTA

CA MANOJ GUPTA (Expert)
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09 June 2011 IT APPEARS THAT BANK HAS TAKEN POSSESSION OF TH EPROPERTY AND WILL AUCTION SO AS TO GET BACK THE OUTSTANDING AMOUNT
In Ghanshyamdas Kishan Chander v. CIT (1980) 121 ITR 121 (AP), it was held by the Andhra Pradesh High Court that where mortgage of capital asset is followed by subsequent sale, ‘transfer’ takes place only when sale is effected.
IN THIS CASE THE AMOUNT RECD ON SALE BY BANK WILL BE TAKEN AS SALE VALUE AND COST OF THE ASSET WILL BE DEDUCTED OUT OF IT TO ARRIVE AT THE CAP GAIN
PLEASE NOTE THAT THE AMT RETAINED BY BANK WILL NOT BE ALLOWED TO BE DEDUCTED IN COMPUTING CAP GAINS SEE V.S.M.R. Jagdish Chandran v. CIT (1997) 227 ITR 240 (SC) ,CIT v. Roshanbabu Mohammed Hussein Merchant (2005) 144 Taxman 720 (Bom),

CA MANOJ GUPTA
JODHPUR
09828510543

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