How to calculate Capital Gains in specific given situation

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Milind M. Kulkarni

Practicing CA

589 Points Joined April 2011

An ancestral property purchased about 70 years ago that has many legal heirs, was sold by one of the heirs in 2003 to a third party without knowledge of other heirs. Other heirs lodged a court case against the heir who committed this fraudulent sale. Now, they have reached an out of court settlement whereby the sale effected in 2003 will be held as valid and each legal heir will receive a certain amount as total compensation for property sale plus cost of harassment suffered & lawyer fees incurred due to this fraudulent transaction.

Question is, whether there will be a capital gain in this case and how should the same be calculated in the hands of one of the legal heirs who is receiving compensation now?

Replies (3)

ayusmita

Tax consultant

5895 Points Joined September 2020

Yes there's will be capital gain
as per the years of possession being short term or long term capital gain
all the legal heirs will pay the capital gains tax as per the respective shares received from the sale of house or in your case compensation and all

Milind M. Kulkarni

Practicing CA

589 Points Joined April 2011

Thank you for your reply. Just additional query -

1. How should cost of acquisition be ascertained as the plot was purchased in 1949 or 1950;

2. While filing ITR-2 for current FY, what details of buyer (name, PAN) should be filled by each heir receiving compensation as these details will not appear in his/ her SFT in form 26AS;

3. Whether the heirs can invest in bonds under Section 54EC as this is not a regular plot sale?

ayusmita

Tax consultant

5895 Points Joined September 2020

As per my knowledge

1. It is difficult to find data of those days even if we have the deed so in that case we have to take the purchase deed as per the date of the sales deed transfer to all the legal hire or in other words they took the possession

2. It's not appearing as the forms are not filled by buyer with respectively with sellers and no tds being cut

If possible does everything with rules and regulations

filled the details as per the sales deed by correctly entering the buyers details and others data available

3 . in general case yes can invest in bond with in 6 month of sailing but I can't say for your case as data's are not in 26as or I don't think it's being reported or being in proper rules and regulations so