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Land transaction

22 November 2012

A PRIVATE LIMITED COMPANY ENTERED INTO A REGISTERED AGREEMENT WITH A PARTY TO ACQUIRE A LAND WITH A CONSIDERATION OF RS. 10,00,000 /- AND MADE A PART PAYMENT OF RS. 2,00,000 /- BUT BEFORE FINAL PAYMENT AND REGISTRATION OF THE LAND THE COMPANY SOLD THE LAND TO THIRD PARTY UPON A CONSIDERATION OF RS. 12,00,000/- , NOW THE QUESTION IS HOW THE PROFIT OF RS. 2,00,000/- WOULD BE TREATED IN THE HAND OF THE COMPANY . WHETHER IT IS CAPITAL GAIN / SPECULATIVE INCOME / OTHER INCOME.

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3 Replies

Anil Sankar V (CA) (1877 Points)
Replied 22 November 2012

IT IS A CAPITAL GAIN.AS IT IS NOT REGULAR BUSINESS FOR THE COMPANY TO SELL..IT IS NOT COMMODITY OF SPECAULATION AS PER IT ACT.

Ravi Kumar Mahaur (CA-FINAL) (202 Points)
Replied 22 November 2012

It is a Capital Gain in the hands of Company. It is a case of "relinquishment of right". And "relinquishment of right" on an asset is consider transfer as per income tax.

CS RAJESH C.CHOUDHARY (ASSISTANT MANAGER) (14607 Points)
Replied 23 November 2012

It depends upon object of the company.
If its main object is sale purchase of land then business profit and in case it is not main object of that company then long term capital gain/short term capital gain, as the case may be.

Regards,

RAJESH CHOUDHARY