Sale of land

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HARITHA (Querist)
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23 September 2016 Sir,,, A land purchased in 1980s ,which is used for business purpose had sold now..... What is the tax treatment of that sale.. either taxable under Capital gain or PGBP????

Amol S Joglekar

Amol S Joglekar (Expert)
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23 September 2016 ownership of land is important than purpose of use of land
Who is the owner? You or business?

HARITHA

HARITHA (Querist)
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23 September 2016 Its a Business property, and the assessee is a proprietor

Amol S Joglekar

Amol S Joglekar (Expert)
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23 September 2016 what do you mean by business property? Is it registered in the name of Business or Individual proprietor?
it will be capital gain.

HARITHA

HARITHA (Querist)
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23 September 2016 Sir, in which cases ,it will be taxed under PGBP???

HARITHA

HARITHA (Querist)
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23 September 2016 Sir, till last year that land was accounted as an asset of proprietorship, so what is the treatment under PGBP??? Isn't the sale of land and profit on such sale needed to show under PGBP???

Amol S Joglekar

Amol S Joglekar (Expert)
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23 September 2016 No.....
tell me...Is it the business of the proprietor to purchase and sell of lands?... if yes, then it can be treated as income from business

HARITHA

HARITHA (Querist)
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23 September 2016 No he is engaged in wine parlour business

Amol S Joglekar

Amol S Joglekar (Expert)
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23 September 2016 so it will be taxed under capital gain.
If his is business of selling and purchasing of land, in that case it could have been taxed under income from profit and gains of business. Ok?

HARITHA

HARITHA (Querist)
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23 September 2016 But sir, what is the treatment of that land in balance sheet

Amol S Joglekar

Amol S Joglekar (Expert)
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23 September 2016 you will be passing the entry in the books for the profit on sale of land

HARITHA

HARITHA (Querist)
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23 September 2016 K, then we are treating that profit twice know???? Under PGBP and Capital gain

Amol S Joglekar

Amol S Joglekar (Expert)
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23 September 2016 No, it is not like that.....tell me the figure at which land is appearing in your balance sheet and the amount at which it is sold... then i can explain the journal entry

HARITHA

HARITHA (Querist)
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23 September 2016 Land as asset in balance sheet Rs.80 lac
Sold at Rs.3 Cr

Amol S Joglekar

Amol S Joglekar (Expert)
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23 September 2016 debit bank 3Cr
credit land 80 lac
credit profit on sale of land 2.20Cr
(Being sale of land for a price of 3 Cr)
Please note the profit on sale of land will be transferred to Profit and Loss account.
Your query please?

HARITHA

HARITHA (Querist)
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23 September 2016 Yaa, on that profit we are computing tax payable, isn't it???

HARITHA

HARITHA (Querist)
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23 September 2016 On that basis, we are computing tax on that profit under PGBP,,. So are you saying not to tax for Capital gain????

Amol S Joglekar

Amol S Joglekar (Expert)
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23 September 2016 No... you need to find out INDEXED cost of acquisition of land, in order to find out the long term capital gain
Remeber one thing once and for all..... income tax computation may be SEPARATE from books of accounts

HARITHA

HARITHA (Querist)
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23 September 2016 K , thank you sir, so we need eliminate that profit element from to arrive at PGBP,. And need to compute income from Capital gain using indexation method ... isn't it????

Amol S Joglekar

Amol S Joglekar (Expert)
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23 September 2016 yes, absolutely right.

HARITHA

HARITHA (Querist)
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23 September 2016 Sir am I correct??? At Last we need to reverse the amount of profit from PGBP right, and tax on that profit under Capital gain.

HARITHA

HARITHA (Querist)
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23 September 2016 K sir,. Thank you very much.....

Amol S Joglekar

Amol S Joglekar (Expert)
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23 September 2016 you are most welcome.

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