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Capital Gain Query....URGENT!!

Hitesh Makhija (Student) (37 Points)

07 January 2011

Hi Friends,

Please help me to solve some queries in Capital Gain.

Q1. Does cost of Construction & Improvement includes the expenditure incurred on purchasing Furniture & Fixtures, Electrical Equipments like Television, Refrigerator, Electrical appliances used while construction.

Q2. Asset is sold and amt is deposited in Capital Gain Acc. Scheme. Assessee has taken housing loan. Can he repay loan through Capital Acc. Scheme.

Q3. Assessee has deposited amt in Capital gain Acc. Scheme. He receives gift from a person & same is used for construction of asset. Can the amount utilised from gift be taken as to be utilised from Capital gain A/c Scheme.

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10 Replies

Manmohan ACA, CS (Chartered Accountant ) (14243 Points)
Replied 07 January 2011

Q2. Asset is sold and amt is deposited in Capital Gain Acc. Scheme. Assessee has taken housing loan. Can he repay loan through Capital Acc. Scheme.

Yes,

Yes, you can prove so

CA MAULIK (C.A) (937 Points)
Replied 07 January 2011

To the first que ans is NO

to the second one also No

third one may be yes

bt do crosscheck from other's ans

rachit jain (chartered accountant ) (635 Points)
Replied 07 January 2011

Q1 - NO

Q2 - YES

Q3 - NO - capital gain a/c is kept with bank and amount kept in this a/c has to be utilised in specified time i.e 3 years from the date of sale. if the amount could not not be utilised within specified time then the remaining balance in a/c will be chargeble to capital gain tax for the financial year in which time lapes. so the amount utilised from gift cant be taken as utilised from Capital gain A/c Scheme.

Member (Management) (325 Points)
Replied 07 January 2011

I am afraid the answer is NO for all three questions. If you read the rules pertaining to Capital Gains Account Scheme, you will realize that it is not possible to withdraw money so easily. If the Assessing Officer can prove that the money that went into the purchase or construction of house did not come from the amounts deposited in the Scheme, then he can probably deny your claim for deduction u/s 54.

So exercise proper care and get professional help.

rajeev kumar, bcom ca-final (study) (196 Points)
Replied 07 January 2011

solved paper of ipcc nov are available in icai site

Nimesh Waghela (Auditor) (25 Points)
Replied 08 January 2011

Q : 1 : Answer is NO, one cannnot include expenses you mentioned for cost of acqusition or cost of improvement.

Q : 2 : Answer is No, assesee can't repay old hosing loan through capital gain scheme conditon is clear that one has to acquire the mentioned assets from the amount so deposited.

Q : 3 : Answer is No, asessee has to utilse the said amount from the scheme, amount recd. from gift canot be treated as amount is used from the scheme.

1 Like

Sharad Suman Das (art) (141 Points)
Replied 08 January 2011

Dear Friend,

Answer to All your question is NO

i totally agree with Nimesh

M.M.SURANA (Director -Taxation ) (532 Points)
Replied 09 January 2011

Mr. Nimesh correct

Megha 84A (Article Assistant) (27 Points)
Replied 14 January 2011

Ans :

(1) Their will b a short term capital gain on d sale of Furniture & Fixtures, Electrical Equipments like Television, Refrigerator, Electrical appliances.

& the exp incurred at the tym of purchase will will form a part of cost of acquisition.

(2) yes it can be utilised for repaying the sum taken as loan in respest of the new house , provided it fullfills the prescribed tym limits of that specified section.

(3) No, the sum received as gift is been utilised, but not the sum which was deposited under the scheme, so,d exemptin will b widdrawn & the deposited sum will be taxable, as LTCG or STCG as the case may be

Sunil (CA in Practice) (94 Points)
Replied 19 January 2011

(1) The Furnitures & other Equipments cant be part of Construction or Improvement unless it is part of construction like Furnished House..

(2) The Loan taken for House Property is the amount utilised for construction and not the amount deposited in CGDS. However, the amount utilised from CGDS for re-payment of Loan with Interest can be considered as utilised

(3) As you have yourself stated that the Gift from the friend was utilised for Construction/Acqn of House, the Funds deposited in CGDS remains unutilised. The CGDS remains unutilised.

In other Words, for Q2 &Q3, the outflow of Funds from CGDS a/c will form a criteria for whether the amount deposited in CGDS scheme was utilised or not.