Capital Gains

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shashank (Querist)
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18 July 2010 House purchased in 1992 for say 5lacs (consisting of land and built up ground floor).
The building was demolished by the owner in FY 09-10 and 3 flats were built, of which 1 flat was sold for say 25lacs in FY 09-10 and 2 flats retained by owner.
Whether capital gains to be computed separately for land/building? Sale deed does not bifurcate proportionate cost of land an cost of construction.
Whether gain/loss will be ST/LT.

CA.JAYAKUMAR.J

CA.JAYAKUMAR.J (Expert)
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19 July 2010 dear shashank, before deciding whether this is short term or long term , we need to trace out the nature of the transaction, when any property development made and sold further with an intention of profit that shall be considered as commercial interest or business income.
we can see any agreements entered between the seller and buyer apart from sale deed,intention mentioned in the sale agreement plays an vital role in deciding the nature of the transaction.
get back for further queries

shashank

shashank (Querist)
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19 July 2010 The owner is not in the business of sale/purchase of properties.

You may now answer the query accordingly.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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19 July 2010 In the given case the owner has incurred the following costs-
1. Initial Purchase Cost (You said it 5L)
2. Cost of Demolition ( I say it 1L)
3. Cost of Construction for bringing up 3 flats into existence.( The owner says 15L)

It is being assumed that all the 3 new flats are of equal size and equal construction cost.

Total cost incurred by the owner is 21L
Cost of Acquisition for 1 Flat is 7L
Sales Consideration 25L(You ...)

Out of Rs.7L; Rs. 1.66667 lac is eligible for indexation. Balance is not required to be indexed. Indexed Cost+5.33333L will be
Total Indexed cost of acquisition.

1 step further ........

Try to adjust the capital gains in Section 54F

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