Capital gains

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Querist : Anonymous

Querist : Anonymous (Querist)

26 December 2013 The assessee, an individual, carrying on business, purchases a building, and claims depreciation on it. The business is carried on for 3 years. There after the assessee ceases to carry on business and the building is now let out by him for last six years. Now he wants to sell the building. How will the capital gain be calculated? Will it be short term in terms of s.50 or long term. What will be the cost of acquisition? From when will he get the benefit of indexation in terms of s. 48?

Guest

Guest (Expert)

26 December 2013 IF IN ANY PREVIOUS YEAR THE DEPRECIATION WAS COMPUTED SO IT COMES UNDER A SHORT TERM CAPITAL GAIN AS PER SECTION 50A. TAKE A NOTIONAL DEPRECIATION FOR LAST 6 YEARS AND CALCULATE WDV ACCORDINGLY THAT WILL BECOME YOU COST OF ACQUISITION.

Nikhil Kaushik

Nikhil Kaushik (Expert)

26 December 2013 Dear Friend,

I believe the assessee should have converted the business asset after cessation of business to capital asset. If he has done so, long term capital gains shall be allowed as holding period shall be more than 36 months. Indexation benefit shall also be allowed.

Please refer https://www.taxmann.com/taxmannflashes/flashart4-11-09_10.htm for a details discussion.

Querist : Anonymous

Querist : Anonymous (Querist)

26 December 2013 Hi Rachit. Thanks for the reply. Is there any citation on matter expounded by you so that i may be able to explain it to the AO.

Querist : Anonymous

Querist : Anonymous (Querist)

26 December 2013 Hi Nikhil. Thanks for the reply. Sir, the asset was never a stock in trade rather a factory building and was depreciable. There is no question of conversion into a capital asset as since it was already a capital asset and not a stock in trade.

Nikhil Kaushik

Nikhil Kaushik (Expert)

26 December 2013 ya friend. I never stock in trade. I said business asset. Since the assessee is an individual, once the business cease to exist, what happens to the assets?? he has the option of transferring business to personal capital asset. Once that is done, long term capital gains shall kick in where the holding period after transfer exceed 36 months. I hope you referred to the article I linked.

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