Capital gain query.
This query is : Resolved
29 December 2012
Pls Answer My Query.
Mr X sold a Residential Property in June 2012. The Capital gain on it is Rs 60 lacs.
He Purchased Another Property in July 2012 for 60 lacs.
He then demolished the property newly purchased.
Then he sold the Ground Floor in small pieces to different shopkeepers to build their shops.
1st & 2nd Floor which will be constructed of which the 2nd floor will be used for residence & 1st Floor will be let out to a commercial bank.
Query 1.
What should be the treatment in capital Gain.?
Query 2.
since 60 lacs is cost of new property, assuming 20 lacs is cost of each floor.
Now 2nd floor cost is 20 lacs, so we would get exemption of 20 lacs from capital gain.
Now sale proceeds of ground floor are 40 lacs. And the cost of construction on 2nd floor which is residential comes to be 40 lacs.
So would we get exemption of whole 60 Lacs or not?
Query 3
Moreover, what would be the tax treatment for the newly residential property purchased and ground floor sold in different pieces.
Kindly Advise.
Mr X sold a Residential Property in June 2012. The Capital gain on it is Rs 60 lacs.
He Purchased Another Property in July 2012 for 60 lacs.
He then demolished the property newly purchased.
Then he sold the Ground Floor in small pieces to different shopkeepers to build their shops.
1st & 2nd Floor which will be constructed of which the 2nd floor will be used for residence & 1st Floor will be let out to a commercial bank.
Query 1.
What should be the treatment in capital Gain.?
Query 2.
since 60 lacs is cost of new property, assuming 20 lacs is cost of each floor.
Now 2nd floor cost is 20 lacs, so we would get exemption of 20 lacs from capital gain.
Now sale proceeds of ground floor are 40 lacs. And the cost of construction on 2nd floor which is residential comes to be 40 lacs.
So would we get exemption of whole 60 Lacs or not?
Query 3
Moreover, what would be the tax treatment for the newly residential property purchased and ground floor sold in different pieces.
Kindly Advise.
29 December 2012
As you have not mentioned any cost for the demolition, it is assumed to be NIL. Whereas the cost incurred in acquiring the demolished structure +land is Rs. 60.00 lac.
.
Query 1. The assessee gets exemption in respect of the Capital Gains which has been utilised in acquiring a residential House.
In Present case he will get exemption on the basis of proportionate cost Out of the total land cost + cost of construction of the residential House i.e. 2nd floor.
.
As you have not mentioned any cost for the demolition, it is assumed to be NIL. Whereas the cost incurred in acquiring the demolished structure +land is Rs. 60.00 lac.
.
Query 1. The assessee gets exemption in respect of the Capital Gains which has been utilised in acquiring a residential House.
In Present case he will get exemption on the basis of proportionate cost Out of the total land cost + cost of construction of the residential House i.e. 2nd floor.
.
29 December 2012
Query 2 & 3.
You may get exemption of full Rs. 60 lacs.
20 Lakh Cost of Land+ 40 Lakh Cost of Construction.
in respect of Residential floor.
.
However, as you have got 40lakhs from the shopkeepers against Rs. 20 lakh, the proportionate cost incurred by you, you will be liable for tax on Short Term Capital Gains of Rs. 20.00 lakh.
.
You may get exemption of full Rs. 60 lacs.
20 Lakh Cost of Land+ 40 Lakh Cost of Construction.
in respect of Residential floor.
.
However, as you have got 40lakhs from the shopkeepers against Rs. 20 lakh, the proportionate cost incurred by you, you will be liable for tax on Short Term Capital Gains of Rs. 20.00 lakh.
.
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