Capital Gain on compulsory acquisition

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 December 2010 If property has been compusorily acquired by the authorities and an award for compensation given but only a part amount has been received in the previous year,how is the Capital Gain to be computed?
Further, if an appeal is filed before the Court for enhancement of compensation,how will the Capital Gain be calculated?

CA. R. B. SAH

CA. R. B. SAH (Expert)
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25 December 2010 As per section 45(5) of the income tax act,1961 when any property is compulsorily acquired by authorities, then capital gain shall be charged to tax in the previous year in which compensation( WHETHER IN PART OR IN FULL) is received but period of holding shall be considered to the date of acquisition.

if compesation is received in part in next previos year of initial compensation, then such part compensation shall be taxed in the year of receipt in same nature of initial compensation.

if compensation is enhanced by the appellate authority, then such enhanced compensation shall be taxed in the previous year in which such enhanced compensation is received in same nature of initial compensation.

if compensation is reduced by the appellate authority, then return shall be rectified within 4 years from the end of the previous year in which order reducing the compensation is passed by the authority.

If any interest is received on the compensation, then such interest shall be chargeable to tax in the previous year in which it is received.

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