Should Calculate Capital Gain or Not

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This discussion explores whether capital gains tax should be calculated on the sale of a shop initially purchased through auction. The client bought the shop for Rs 10 lakh, which was then leased via a Rent cum Lease Deed for three years before being sold for Rs 9 lakh. The core question is whether this transaction results in a capital gain or loss, or if the amounts should be treated as a security deposit refund. The advice given suggests that capital loss is likely, and the cost of acquisition should include all related expenses like premium, stamp duty, and payments to the previous owner.

Ritik Jain

Ritik Jain (Querist)
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12 September 2021 My Client Purchased a Shop from Nagar Palika For Rs. 10 lakh in Auction. And then for transfer of shop to me. Nagar palika executed a Rent cum Lease Deed for a period of 3 years. (Year 2015) my client paid monthly rent charges and renew the contract after consecutive 3 years. In Feb 2021 client Sale the asset to third third person for rs 9 lakh. Further Nagar Palika executed a Rent cum lease contract. For transfer the shop from my client to third party.
(A) So should capital gain on this transaction or not. (B) or should purchase amount consider as Security deposit or sale amount consider as SD Refudable amount. (10 lakh - 9 lakh = 1 lakh Capital Loss) Note : at the time of sale comsideration rs. 9 lakh received from third party who purchased the shop.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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12 September 2021 (10 lakh - 9 lakh = 1 lakh Capital Loss) Note : at the time of sale consideration rs. 9 lakh received from third party who purchased the shop.

Ritik Jain

Ritik Jain (Querist)
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13 September 2021 Sir this means no capital gain calculation will be done on this transaction.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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13 September 2021 Capital gains calculated on this transaction. It's capital loss.

Ritik Jain

Ritik Jain (Querist)
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22 September 2021 Sir in that case Assess has paid 125000 as a premium to Nagar palika + 15100 stamp duty + additionally paid 800000 to previous owner of shop in 2015. So that Sir what is the cost of Acquisition of Shop. Please guide

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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23 September 2021 Cost of acquisition include all the above expenses.

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