Capital Gain Tax

Save Share

This query is : Resolved

Quick Summary

Chirag Dayani is seeking advice on whether Section 50 of the Income Tax Act can be applied to avoid capital gains tax when exchanging his shop for another. He currently files under the presumptive scheme (Section 44AD). The response clarifies that an exchange is a taxable transfer. It suggests reducing the block value of depreciable assets by the sale consideration if the shop was previously shown as such. If this isn't possible, capital gains should be offered for taxation, considering that depreciation is deemed allowed under Section 44AD.

chirag dayani

chirag dayani (Querist)
Follow

28 February 2020 I have a shop and to the left right of it are shops which are qwned by a single owner.

I entered into a deal with that owner to exchange the shops with him and i agreed to exchange mine with that falling left to my shop.

Now I file return under section 44AD presumptive scheme, so just want to know that can apply Section 50 of Income Tax Act to save capital gain on depreciable assets.

Kindly advise.

Thanks

Chirag Dayani.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
Follow

02 March 2020 1. It is clear that exchange of a capital asset is a transfer and as such liable to capital gains.
2. In case you have shown earlier your shop as an depreciable asset and in the same block ( i.e. of Land & Building @ 10%) you can reduce the block value by the amount of sales consideration (Stamp Duty Valuation, if no other benefits received).
3. If , no such avenue is available , offer the capital gains for taxation.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
Follow

02 March 2020 Though your new shop is also come in the similar block but the fact must be kept in mind that you have claimed depreciation on the older shop in the preceding previous years.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
Follow

02 March 2020 In S. 44AD it is deemed that depreciation is allowed on all the depreciable assets. So if you dare to take this calculated risk then you may follow the same of claiming depreciation in the forthcoming years.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now