Capital Gain Tax

Others 301 views 2 replies

Mohit Agarwal

24 Points Posted on 11 January 2019

Please clarify

“A”, “B” & “C” are three brothers. They have 3 immovable properties (D,E & F) under joint family. They move to court for partition. Court valued the property as follows:

Property D Rs. 55 lakhs

Property E Rs. 40 Lakhs

Property F Rs. 40 Lakhs

Total Property Value Rs. 135 Lakhs (Each will get Rs. 45 Lakhs as per court valuation)

“A” received property D and liable to pay Rs. 5 Lakhs each share to “B” & “C”.

“B” received property E and will also receive Rs.5 Lakhs from “A”

“C” received property F and will also receive Rs.5 Lakhs from “A”.

But “A” refuse to pay Rs. 10 Lakhs to “B” & “C” in front of court, so court decided to auction the property D and from auctioned amount of Rs. 50 Lakhs court directed the purchaser to pay Rs. 5 lakhs each share to “B” & “C” and the remaining balance to “A”.

Now the question is

1) Do capital gain on sale of immovable property D through court will arise?

2) If yes , who will bear the Capital Gain Tax?

Replies (2)

Nitesh bind

Student CA Final

12692 Points Posted on 11 January 2019

When you will see the Definition of Transfer u/s 2(47) there is clearly coverer every kind of sale, exchange, relinquishment etc of the Capital Assets and Nothing has been said about the status of Transferor. So In my opinion:

1. Capital Gain shall be arise even if it is being sold by court in the procedure of settlement.

2. The Capital Gain Tax amount should be set aside by court from the sale Consideration and balance shall be Divided between the brothers.

Other suggestion are highly appreciated.

rakesh kumar

2 Points Posted on 12 January 2019

property D E and F are joint property.
in normal circumstances distribution of property under family partition does not attract capital gain.
but here the situation is different. one joint property D is sold. hence capital gains arise on the sale of the property.
now there question is that in whose hand capital gains should be assessed. A, B or C or on all three.
since the property is joint owned hence all are equally liable for capital gain tax.
Now, the question is about distribution of money received and distribution of property E And F
Now the court auctioned amount is of Rs. 50/- for property D. now calculate money value arthimatically and distribute among them