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Test your knowledge in capital gains- Question 1

karthikeyan.v (Chartered Accountant) (523 Points)

10 March 2010

Dear friends,

Any profit or gain arising from the transfer of capital asset during the PY is chargeable to tax under the head Capital gains in the immediately following AY if it is not eligible for exemption under sec 54, 54B, 54D, 54EC, 54F, AND 54GA.

Now name the only one instance when capital gain tax is attracted and the assessee has to pay capital gain tax even when there is not transfer

regards

karthi

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10 Replies

madhur gupta (student/article ) (1022 Points)
Replied 10 March 2010

sir how can be there a capital gain when there is no TRANSFER of captal asset ......................

there can be a capital gain when money was invested in capital gain scheme and now remain unutilised...........

Hareesh H Sharma (Cleared IPCC..now article) (894 Points)
Replied 10 March 2010

when he receives enhanced compensation he has to pay tax for the asset already transfered

Bala (Student) (498 Points)
Replied 10 March 2010

Originally posted by : Hareesh H Sharma
	when he receives enhanced compensation he has to pay tax for the asset already transfered

Dear friend, It is under a compulsory acquistion,, In such a case the transfer has already over, where is capital gain taxed without a transfer here.. i think there is no such instance.. lets wait for others reply..

CA Saurabh Shukla (Accounts Executive) (223 Points)
Replied 11 March 2010

Sec 45, chargability of capital Gain

- there should be transfer

- there should be capital Asset.

So, if there is no transfer there is no capital Gain tax.

So, dear Karthi Let us know that situation.

and don't tell the case in which Asset prev. has been transferred.

karthikeyan.v (Chartered Accountant) (523 Points)
Replied 11 March 2010

Dear madhur,hareesh, balakrishnan,surabh

Sec 54 F - Sale of a long term capital asset and purchase of a residential house, the amount invested in the new house ie.purchased with in two years or constructed with three years shall be exempted from capital gains.

one condition is that the assessee shall not buy or construct another house other than the one purchased,

if the second house is purchased within the said 2 years or constructed within 3 years, the capital gains that was previously exempt will now become taxable in the year of purchase of this second house.

in this situation capital gains tax gets attracted on purchase of an asset and not on the basis of transfer

thank you

karthi

nilesh dube (Service ) (74 Points)
Replied 11 March 2010

Dear karthikeyan,

In your question you asked that there should not be any transfer and still capital gain will be charged. But dear the example which you gave contains the case of transfer of the assets only. Capital gain in your case is chargeable to tax not because of purchase of the assets but because of the violation of the condition of the exemption that no assets should be purchased within the prescribed period. so unless and untill there is transfer of the assets, no capiatal gain will be charged.

karthikeyan.v (Chartered Accountant) (523 Points)
Replied 11 March 2010

Dear Mr. Nilesh

yes ofcourse it is on violation of the condition, alright, i wanted to stress the point that there could be capital gain tax attracted even when there is purchase of an asset. in such a case there is no transfer as contemplated under sec 45 (1). which i have given in the question.

the pont that i wanted to tell my fellow friends here is, if in case they have missed it out for the preparation for their exams, it could be useful to them.

you attention is drawn to to Chapter seven in Direct tax laws by Dr. Vinod.k.Singhania, on page 462 Para 166-- 2nd point and also to para 183.3

I have reproduced the same sentence that the learned Author has given-

regards

thank you