Income Tax
This query is : Resolved
25 March 2009
Shop was purchased in the year 1987-88 at 1.50 lacs and renovation to the said shop was made amounting to Rs. 1 lac in the same year.
Now we are expecting sale proceeds in the A.Y 2009-10 amounting to Rs. 25 Lacs.
Kindly let us know the tax implications and or investment to be paid so as to have mimimum tax liability within the legal framework.
Shop was purchased in the year 1987-88 at 1.50 lacs and renovation to the said shop was made amounting to Rs. 1 lac in the same year.
Now we are expecting sale proceeds in the A.Y 2009-10 amounting to Rs. 25 Lacs.
Kindly let us know the tax implications and or investment to be paid so as to have mimimum tax liability within the legal framework.
M KRISHNAKUMAR
(Expert)
26 March 2009
let us view in two angles.
if shop purchased and used for own business then the asset is business asset. so if renovation incurred is in the nature of repairs ie no addition to building then it is only repairs. so only deduction is only u/s 30 for repairs. if that is the situation depreciation will have to be charged on shop original cost. if that is tha situation the gain will be short term capital gain. if shop is let out it is income from house property. then renovation can be claimed as cost of improvement. so indexed cost can be claimed for both original cost and improvement. then gain will be long term capital gains.if long term capital gains reinvestment can be made either u/s 54F or u/s 54EC to claim exemption
if shop purchased and used for own business then the asset is business asset. so if renovation incurred is in the nature of repairs ie no addition to building then it is only repairs. so only deduction is only u/s 30 for repairs. if that is the situation depreciation will have to be charged on shop original cost. if that is tha situation the gain will be short term capital gain. if shop is let out it is income from house property. then renovation can be claimed as cost of improvement. so indexed cost can be claimed for both original cost and improvement. then gain will be long term capital gains.if long term capital gains reinvestment can be made either u/s 54F or u/s 54EC to claim exemption
Dhirajlal Rambhia
(Expert)
28 June 2023
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