Capital gains

Tax queries 770 views 11 replies

This is a querry on behalf of my friend.

He had purchased a land in the year 2000 and in 2008 he along with his friend and relative started a building construction - real estate  business, as a partnership company with equal profits. He used his own land and his relative land and built residentail buildings..

The question is what is the capital gains treatment once the builildng/ flats are sold.

The FMV as on date of puchase or conversion will be taken.

Will the LTCG be income of individual or Partnership firm and who will be liable for tax.

Replies (11)

long term capital gain taxable in the hand of owner of land i e individual 

Here, Sec 45(2) will come into picture for capital gain arising due to conversion of  asset into stock in trade .....

But the same will be chargeable to tax in the year when the said asset is actually sold in the course of business.

So , due to  the sale of flats:

1. Fiirm will earn Income from Business

2.Partners will be taxed for Capital Gains:

where, Full Value of Consideration (FMV as on the date of conversion of asset to stock)-xxxx

               Less: Indexed Cost  of Acquistion                                                                                  xxxx

totally agreed with saurabh..

It will be taxable in the year of sale of flats.

Capital gain shall be :

FMV (as on date of putting the asset in bussiness) - Indexed (if long term) Cost of Acquisition.

What if the land is registered in the name of the Individual partner and not firm

Was it necessary to transfer the land to partnership..

Dear All

 

Please advise..

Even if land is registered in the hands of Individual name of partners ...still firm will earn busines income because  the firm was holding those flats  as stock ...and perhaps partner will not be taxed for the business income already taxed in the hands of firm....but anyway your question is nice enough and brain excercising.

I think even in that case, answer wud remain same.

Thanks Saurabh for answering my querry and also appreciating it..

Another twist to the question.. what if ind ividual who owns the land is one of the members of the  HUF 

From capital gain viewpoint, the capital gain from the sale of building and the land will be considered separately. So different capital gain for land and different for the building.

Originally posted by : work is worship

Thanks Saurabh for answering my querry and also appreciating it..

Another twist to the question.. what if ind ividual who owns the land is one of the members of the  HUF 

In that case also position will be same because the individual is owning the land in his personal capacity  and not  in the capacity of representative of the HUF.......so he is a member of the HUF is not relevant ...so in that case also firm will be chargeable to tax under  Income from Business and individual will not be taxed for the same.............

Next twist please....?????

Originally posted by : Mihir

From capital gain viewpoint, the capital gain from the sale of building and the land will be considered separately. So different capital gain for land and different for the building.

HI Suarab.. thanks for the answer to the twist question.

What is your view point to this as it is confusing me more.


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