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Capital gain

04 March 2016

A dispute between two brother for land non agriculture land got settled by paying RS 60 lakh by one to other . Wether capital gain arise ?

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5 Replies

Manideepvasa (Article Trainee) (37 Points)
Replied 04 March 2016

If the land is a long term capital asset we can avoid capital gains in two ways.

1) Section 54 EC (Investment in RECL,NHAI bonds.....) subject to 50 lakhs in a financial year and the maturity period is of 3 years. If it is sold or transfered in 3 Years the amount exempted is taxable.

2) Section 54 F(Investment in new residential House Property) House Property should purchased before 1 year or with in 2 years of transfer.He should not own any other Residential property.He should not transfer with in 3 years. If he tranfers the exempted amount is taxable.

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Gagan Deep Singh (CHARTERED ACCOUNTANT) (1190 Points)
Replied 05 March 2016

Capital gain will arise only if a capital asset I.e. land is transferred to other for a consideration of Rs 60 lac.

(Guest)

In my view, If the other brother did not own the property( did not have any rights by way of inheritance any other), then it cannot be capital gains.

If the brother who pays 60L agrees to consider it as a gift given, then it will not be taxed.

(Guest)

In case of family settlement the following case law is relevant:

IN THE PUNJAB & HARYANA HIGH COURT AT

CHANDIGARH Date of Decision: 10.01.2013 ITA No.353 of 2011

Commissioner of Income Tax II, Jalandhar¦Appellant

Versus

Ashwani Chopra¦Respondent

we find that the payment of Rs.24 crores to Group A is to equalize the inequalities in partition of the assets of M/s Hind Samachar Ltd. The amount so paid is immovable property. If such amount is to be treated as income liable to tax, the inequalities would set in as the share of the recipient will diminish to the extent of tax. Since the amount paid during the course of partition is to settle the inequalities in partition, therefore deemed to be immovable property. Such amount is not an income liable to tax. Thus, the amount of owelty i.e. compensation deposited by Group B is to equalize the partition represents immovable property and will not attract capital gain.