Capital gains

This query is : Resolved

R.V.VISWANATHAN

R.V.VISWANATHAN (Querist)

28 May 2019 X leaves a will by which he bequeaths residential house to his daughter with the condition that his wife shall be entitled to enjoy income from the house during her lifetime. This property is sold by the daughter during the lifetime of the wife. The buyers pay a sum of Rs.3 lakhs to the wife for surrendering her right to enjoy income from the house.
TDS @ 1% also is deducted by the buyers u/s 94IA.
Query is whether the sum of Rs.3 lakhs is assessable as capital gains in the hands of the wife.
There is no cost for this right. So, on the ground that computation of capital gains fails, can this receipt be treated as exempt.. Kindly enlighten

CA Rashmi Gandhi

CA Rashmi Gandhi (Expert)

28 May 2019 Amount of Rs.3,00,000 paid for surrender of right is transfer expenses and same is deducted while calculate capital gain income

R.V.VISWANATHAN

R.V.VISWANATHAN (Querist)

29 May 2019 No. That was not the query.
Whether the Rs.3 lakhs is assessable as capital gains in the hands of the recipient. That's the question.
Moreover, the Rs.3 lakhs has been paid by the buyer of the property to the person who does not have ownership right over the property

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

29 May 2019 The person has right on the property to receive the rent over her life time. Hence the receipt of 3 lacs will be considered as capital gain. If this is the only income during the year file ITR claim refund, as income below threshold.

R.V.VISWANATHAN

R.V.VISWANATHAN (Querist)

29 May 2019 Thank you, Sir.

One last point, while browsing some case laws, I found a case where it has been laid down that where cost cannot be determined as in this case, capital gains computation itself fails and becomes exempt. (Exceptions for this are goodwill, tenancy right). Please do examine this point too.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

29 May 2019 No it's not right it will be taken as zero in case of tenancy rights.

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