There is a land on the name of 4 people.
Now they want to gift the land to people who are their relatives u/s 56(2)(vii). So no tax will be levied on the same. A proper registry of the gift will also be done by paying stamp duty.
Now the people who have got the gift want to construct flats on the same and then sell them.
They are receiving the gift as a capital asset.
So implications if:
1. They show the same as capital assets and flats constructed as cost of improvement.?
2. They convert the same into stock for business and claim construction expenses.?
3. Any other way you may suggest.?
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Capital asset u/s 49(1) to stock
Replies (2)
I think Building and Land are two different capital assets. so we can't treat the expense as cost of improvement. It should be cost of building.
"Now the people who have got the gift want to construct flats on the same and then sell them."
From this statement I am assuming that the person who is recieving are doing Business activity.
Hence, cost of land will be a Cost of previous owner and the same will be a allowable Expenditure -sec 43C
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