Section 11(1a)

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This query is : Resolved

Sneh Thakkar (Querist)

22 December 2011 For charitable trusts, if capital asset sold and further new capital asset acquired and if only a part of the net consideration is utilised for acquiring the new capital asset, then balance capital gains is chargeable to tax. Out of which 15% if exemption available u/s. 11(1)(a). But should 15% exemption be available for balance capital gains or on total capital gains.
eg asset sold for rs. 100.
Cost of that asset rs. 70.
new asset purchased rs. 80

option 1: (100-70) = 30
shortfall in investment = 100-80 = 20
so capital gains chargeable = 30-20 = 10
15% of above if applied i.e. 10x15% then exemption. balance 85% tax = 8.5

option 2: capital gains = 100-70 = 30
30x85% to be applied = 25.5
but applied as per 11(1A) = 20
so balance taxable = 25.5-20 = 5.5

CA CS PRASHANT

CA CS PRASHANT (Expert)

22 December 2011 Computation of capital gain

Sale proceeds 100
Less:Cost 70
Capital Gain 30(100-70)

Less Exemption u/s11(1) 4.5(30*15%)

Balance taxable 25.5(30-4.5)

Less exemption u/s54 series
30/100*80 =24

Balance taxable=25.5-24=1.5

Sneh Thakkar

Sneh Thakkar (Querist)

24 December 2011 thank you sir. But i think section 54 series is not applicable to trusts because the income of trust has to be calculated on real income basis (i.e. commercial income) and not as per provisions of Act. Also sec. 11(1A) takes care of giving exemptions to 54 series. So 54 series exemption is not ideally available.

CA CS PRASHANT

CA CS PRASHANT (Expert)

31 December 2011 Ya agree dear....sorry for wrong info...

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