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CAPITAL GAIN

Kapil (CA Practice) (120 Points)

29 April 2010

PLEASE SOLVE THIS QUESTION

A Ltd. purchased a building for an individual undertaking on 01-01-2006 for Rs. 400000/-. Prior to this, the company has taken this building on rent for last two years and was using it for its industrial activities. There is no other building in the block. This property was compulsorily acquired by the state govt. on 14-8-2009 and a compensation of rs. 500000/- was given to the company on 21-3-2010. The company has purchased another building for shifting its industrial undertaking for rs. 300000/- on 15-10-2010. Compute Capital gains for the assessment year 2010-11.

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2 Replies

DT Fundas - Tarun rustagi ( Author) (1150 Points)
Replied 29 April 2010

dear sir

this is sure that the company can not take benefit of exemption u/s54 because the amount was deposited in capital gain account scheme before the due date of filling of roi.

hence capital gain can be computed as under-

net consideration=500000

icoa=400000/497*632=508650

LTCL=8650

as loss arises from computation benefit of sec.54 can not be taken

Amir (Learner) (4016 Points)
Replied 30 April 2010

Dear Kapil Sir,

				Depreciation
FY	Opening WDV	Purchased	Sale	Rate	Amount	Closing WDV
2006-07	-	400,000	-	10%	40,000	360,000	Note 1
2007-08	360,000	-	-	10%	36,000	324,000
2008-09	324,000	-	-	10%	-	324,000	Note 2
2009-10	324,000	300,000	500,000	5%	6,200	117,800	Note 3

Note 1	Depreciation will be provided at full rate even though the building was purchased on 01.01.2006 since it was used for more than 180 days in the year in which it was purchased (in the capacity of tenant)

Note 2	No Depreciation shall be allowed since there is no asset in the Block. Further capital gains in case of cumpulsory acquisition are charged in the year of receipt so Capital gains shall not be computed in FY 2008-09.

Note 3	Block shall be reduced by the amount of compensation but since assesee has added a new asset in the block that restored the Block. Therefore Capital gains shall be computed only if WDV becomes Negative, which is not the case & hence Sec 50 is not attracted. Depreciation shall be allowed at half the rate since new building was used for less than 180 days.