Capital Gains Tax

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Manickchand (Querist)
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19 October 2009 A private limited company acquired in 1986 commercial property which consists of open land and building thereon. It has let out the entire said property to one tenant and is earning rental income from this property.
The company has also been claiming depreciation on the said property.
The company does not have anyother income.
The company wants to sell the property. Can the company be exempted from paying Capital Gains Tax if it reinvests the sale proceeds in another commercial property? If yes, what are the conditions to be complied with?
Thankyou

CA. Vinod Pandey

CA. Vinod Pandey (Expert)
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19 October 2009 "On assumption that there is only building and land is not there"
There can be CG on transfer of depreciable assets:
1. if entire block of asset is transferred: sale proceed exceeds the aggregate of COA + exp on trf= STCG on other hand if less than COA+ exp on trf then STCL &
2. If part of block of asset is transferred: if sale proceed exceeds the aggregate of COA+Exp on TRF then STCG on other hand no gain/loss balance would be wdv and depreciation to be charged accordingly.
Further regarding exemption from tax on capital gain is not there since company assessee is eligible to claim exemption u/s 54D, 54EC, 54ED, 54G & 54GA and all these are for long term/short in different cases.
hence, exemption is not available in this case.

Rajeev

Rajeev (Expert)
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19 October 2009 Is it the business of the company to buy buildings and let out ? Does the MOA specify this as an object of business ?

If not , then your income has to be taxed as income from house property (cos primarily rental income from letting out of commercial building is to be covered under income from HP), the depreciation claim is also wrong , since its not used for the purpose of business .

Assuming its a business asset , then it will deemed short term capital gain if the sale proceeds exceed the block of asset .

yes the capital gains could be exempt , and no conditions are required to be fulfilled

There is no specific exemption , but if you purchase a similar property before 31/3 of the year in which the sale has taken place , then the block will not be Nil , hence the question of capital gains doesnt arise . :)

It should be noted that capital gains only arise if the block of asset is negative , if u can manage to keep a positive block of asset , capital gain can never arise :)

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