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Capital gain on amount recd from landlord

barun maskara (audit manager) (41 Points)

17 January 2013

Dear All,

My clinet has an office in an appartment which he has taken on Salami Bhada at a monthly rent of Rs.2500 and security depost of Rs.1,50,000 in 1999. Now, landlord has asked my client to vacate the property and giving my clinet Rs.6,00,000 for vacaing the same.

Now I am confused whether it will be a capital receipt in the hand of my client and thus, no taxes as my client doesnt own the capital asset or he will be liable to pay capital gain. If he is liable to pay capital gain, what will be the cost of acquasition?

This is urgent. Kindly help.

Regards

Barun

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Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 17 January 2013

in this case the clinet is surrendering his right to occupy the property. since right is an capital asset, so relinquishing the right to occupy the property would attract capital gains tax for the conisderation recd to surrender the right.

The COA in this case would be NIL, as right is an intangible asset whihc is gained over a period of time. the assessee can however claim expemption u/s 54EC or 54F at his option.

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