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Capital Gain/Business Gain

Kiran Shinde (Accountant) (46 Points)

07 August 2010

Dear All,

Public Unlisted Company has purchased a NA land in the FY 2008-09 and shown in Fixed Asset. It was purchased for an expansion of the Business Activity. but till date nothig is materialised and the land is as and when condition, without any development and construction. Now company wants to sell the same land. whether the proceeds of the sale/Profit from sale of land will be it will be a Capital Gain (short tem/Long Term) or Business Income?

Company also plans o purchase a land in another state, Can we take the benefit of purchase of land and set off the profit from sale of present land? Please guide

Thanks in advance.

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5 Replies

himanshu (ca) (104 Points)
Replied 07 August 2010

there is no depreciation on land so it is not belonging to any block.and company also not doing business of sale and purchase of land.so it is not business profit and it will be chargeable under capital gain

CA Deepak Joshi (TaxTalk) (178 Points)
Replied 07 August 2010

It all depends on the business objects of the co. If the objects state that it is into the business of trading land then its Business Income.
But if it doesn't state anything like it, then it is capital gains.

also u can claim exemption if u do purchase another land but that too within a specified time period.Sorry bt right nw i am unable 2 quote the sec.

Member (Management) (325 Points)
Replied 07 August 2010

Even if it is a business asset (not stock in trade), you can claim the benefit of indexation and pay tax at the concessional rate for LTCG. This is because, it is not a depreciable asset.

As for purchasing another land and claiming the benefit of rollover, there is no such provision in the Act.

The present provisions of Section 54 and 54F are for individuals and HUF only and that too for purchase of a residential property only.

(Guest)

Originally posted by : Member
	Even if it is a business asset (not stock in trade), you can claim the benefit of indexation and pay tax at the concessional rate for LTCG. This is because, it is not a depreciable asset. As for purchasing another land and claiming the benefit of rollover, there is no such provision in the Act. The present provisions of Section 54 and 54F are for individuals and HUF only and that too for purchase of a residential property only.

adisri (Final ) (610 Points)
Replied 08 August 2010

Even though land has been purchased for the purpose of business there in no Depreciation for Land. If that land was sold it will be treated as Capital Gain only and not as a business income , depending upon the period of holding the asset LT/ ST capital gains has to be calculated and in case of LT the benifit of Indexation can be availed