Sale of old commercial property

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A firm sold a shop within a commercial complex after holding it for 20 years. The query concerns the tax implications, specifically whether the difference in sale price is taxed at 33% or if indexation benefits apply. The consensus is to treat it as a capital asset, claim indexation, and pay long-term capital gains tax. Guidance is also provided on how to correctly reflect this transaction in the profit and loss account and balance sheet, treating the conversion of stock-in-trade into a capital asset as a transfer.

pooja

pooja (Querist)
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17 July 2024 Dear Sir/Ma'am,
My query is that my client made a commercial complex 20 years back and there was only one shop that was in stock and he sold this shop in 2023-24, now the difference in price is huge so is he bound to pay tax @33% on the difference amount or some indexation benefit is allowed in this case. The assessee is a firm

Thanks and Regards

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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18 July 2024 Treat it as capital asset and claim indexation benefit plus 20% long term capital gains tax.

pooja

pooja (Querist)
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18 July 2024 Thanks a lot Sir but can closing stock shown in the profit and loss account be treated as capital asset and how to show it in the balance sheet

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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18 July 2024 The conversion of stock-in-trade into capital assets under section 45(5a) shall be treated as a transfer of a capital asset, and the taxpayer shall be liable to pay tax on the capital gains arising from such transfer. The tax liability shall be calculated as per the provisions of the Income Tax Act.

pooja

pooja (Querist)
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22 July 2024 Dear sir,
I will show it it capital gains but how to show it in profit and loss account, do I need to show it profit on sale of asset and from where should I reduce it again from profit and loss account to show it in capital gains head...

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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22 July 2024 Show it as capital gains in profit and loss account.

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