Taxmann's Tax Laws & Practice (Tax) | CRACKER | AY 2024-25

Contents PAGE

Chapter-wise Marks Distribution

I-5

Previous Exam Trend Analysis

I-7

Chapter-wise Comparison with Study Material

I-9

PART I DIRECT TAX

1.3

u DIRECT TAX AT A GLANCE

Chapter 2 2.1

u BASIC CONCEPT OF INCOME TAX

Chapter 3 u INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME

3.1

Chapter 4 u INCOME UNDER THE HEAD SALARY

4.1

Chapter 5 u INCOME UNDER THE HEAD HOUSE PROPERTY

5.1

Chapter 6 u PROFITS AND GAINS FROM BUSINESS AND PROFESSION

6.1

Chapter 7 7.1

u CAPITAL GAINS

Chapter 8 8.1

u INCOME FROM OTHER SOURCES

I-11

TAXMANN®

Chapter 1

I-12

CONTENTS PAGE

Chapter 9 u CLUBBING PROVISIONS AND SET-OFF AND/OR CARRY FORWARD

OF LOSSES

9.1

Chapter 10 10.1

u DEDUCTIONS

Chapter 11 u COMPUTATION OF TOTAL INCOME AND TAX LIABILITY OF

VARIOUS ENTITIES

11.1

Chapter 12 u CLASSIFICATION AND TAX INCIDENCE ON COMPANIES

12.1

Chapter 13 13.1

u PROCEDURAL COMPLIANCE

PART II TAXMANN®

INDIRECT TAX (GST & CUSTOMS) Chapter 14 u CONCEPT OF INDIRECT TAXES AT A GLANCE

14.3

Chapter 15 u BASICS OF GOODS AND SERVICES TAX

15.1

Chapter 16 u LEVY AND COLLECTION OF GST

16.1

Chapter 17 u TIME, VALUE & PLACE OF SUPPLY

17.1

Chapter 18 u INPUT TAX CREDIT & COMPUTATION OF GST LIABILITY

18.1

Chapter 19 u PROCEDURAL COMPLIANCE UNDER GST

19.1

Chapter 20 u OVERVIEW OF CUSTOMS ACT

20.1

CONTENTS

I-13 PAGE

PART III MULTIPLE CHOICE QUESTIONS MULTIPLE CHOICE QUESTIONS

C.3

PART IV CASE BASED OBJECTIVE QUESTIONS CASE BASED OBJECTIVE QUESTIONS

D.3

TAXMANN®

C

H

A

P

7

T

E

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CAPITAL GAINS

Q.1 Define Transfer as per Income-tax Act, 1961.

[June 2014 New] [6 Marks] Ans.: Transfer of a capital asset includes Sale, Exchange, or Relinquishment of the asset or compulsory acquisition by Law. Following rules are applicable in this regard for purpose of capital gain: 1. Immovable Property when documents are registered – Transfer is effective when conveyance deed is registered. OR under section 53A, when a contract is signed and advance is given, later on registered.

2. Movable Property – When property is delivered.

Ans.: LONG TERM CAPITAL GAIN: Long term capital gain arises when period of holding a capital asset is more than 12/24/36 months as per following categories: CATEGORY A: In case of following assets the period of holding must be more than 12 months (applicable with effect from July 10, 2014): u

Equity/Preference Shares in a Company which are listed in a recognized stock exchange in India.

u

Debentures, Bonds, Government Securities, Derivatives (Listed in recognized stock exchange in India).

u

Units of Unit Trust of India (Listed or Not).

u

Zero Coupon Bonds (Listed or Not).

CATEGORY B: In following cases the period of holding must be more than 24 months: u

Equity/Preference Shares in a Company which are unlisted. (Applicable with effect from 01-04-2016).

u

Immovable property i.e. Land or Building or Both (applicable with effect from 01-04-2017).

7.1

TAXMANN®

Q.2 Write a note on Long Term Capital Gain and Short Term Capital Gain.

[Dec. 2009] [4 Marks]

7.2

PART I : DIRECT TAX

CATEGORY C: In case of all other assets period of holding must be more than 36 months.

SHORT TERM CAPITAL GAIN: Short term capital gain arises when the period of holding of an assets is 12/24/36 months or less, as per detailed description given above in long term capital gain.

Q.3 Distinguish between ‘Long Term Capital Gain’ and ‘Short Term Capital Gain’.

[June 2009] [2 Marks] Ans.: Long Term Capital Gain

Short Term Capital Gain

TAXMANN®

1. A Capital Asset held by an assessee more A Capital Asset held by an assessee up than 36 months. to 36 months.

2. Equity or Preference Share in a Company, listed in recognized stock exchange in India, Securities listed in recognized stock exchange in India, Units of UTI (quoted or not), Units of an equity oriented mutual fund (quoted or not), Zero Coupon bonds (quoted or not), the period of holding is more than 12 months.

Equity or Preference Share in a Company, listed in recognized stock exchange in India, Securities listed in recognized stock exchange in India, Units of UTI (quoted or not), Units of an equity oriented mutual fund (quoted or not), Zero Coupon bonds (quoted or not), the period of holding is up to 12 months.

3. In case of Land and Building transfer on In case of Land and Building transfer on or after 01-04-2017 the period of holding or after 01-04-2017 the period of holding is more than 24 months. is up to 24 months.

Q.4 Distinguish between Cost of Acquisition and Cost of Improvement.

[June 2011] [3 Marks] Ans.: Cost of acquisition of an asset is the value which was paid by the assessee. It includes expenses/commission paid on purchase and interest on money borrowed to purchase the asset.

Cost of improvement is capital expenditure incurred by the assessee in making additions and improvement, which enhance capital value of asset.

Q.5 Discuss the tax implications arising consequent to conversion of a capital asset into stock-in-trade of business and its subsequent sale.

[June 2014 New] [7.5 Marks] Ans.: If a capital asset is converted into stock-in-trade the following rules are applicable regarding valuation of the asset on date of conversion and its subsequent sale: 1. It is assumed that capital asset has been transferred on the date of its conversion.

2. Accordingly fair market value of the asset on the date of conversion is taken as full value of the asset converted.

CH. 7 : CAPITAL GAINS

7.3

3. However, capital gain (if any) is taxable only when asset is actually sold out after conversion into stock in trade.

4. Any profit or loss after conversion will be business income or loss, as the case may be.

Q.6 Write short notes on the capital gains in case of damage or destruction of capital asset.

[Dec. 2009] [5 Marks] Ans.: If a person receives insurance claim or compensation from government in case of damage or destruction of capital asset, it is treated as full value of consideration for purpose of computation of capital gain (if any) and it is taxable. However this rule is applicable only when damage or destruction was caused by following: 1. Flood, Typhoon, Hurricane, Cyclone, Earthquake etc.

2. Riot or Civil Disturbance.

3. Accidental fire or explosion.

4. Action by enemy or in combating an enemy.

Ans.: Under section 54F Capital Gain arising on transfer of any long-term asset (except residential house property) is eligible for exemption, provided net sale proceeds were invested in acquisition of another one house within one year prior or two years hence from the date of transfer. If new one house is constructed, the period is next three years from the date of transfer. Exemption under section 54F is available, provided on the date of transfer the taxpayer owns one residential house only. Amount of exemption is as follows: Amount of Exemption = Capital Gain × Cost of new house/Net Sales Consideration of asset sold Q.8 Distinguish Between Exemption under Section 54G and Exemption under Section 54GA. [Dec. 2010] [5 Marks] Ans.: Under section 54G, Capital Gain arising on transfer of assets due to shifting of an industrial undertaking from urban area to rural area is exempt.

The exemption is amount of Capital gain or investment in new assets acquired, whichever is less.

Under section 54GA, Capital Gain arising on transfer of assets due to shifting of industrial undertaking from urban area to special economic zone is exempt.

The exemption is amount of Capital gain or investment in new assets acquired, whichever is lower.

TAXMANN®

Q.7 Explain the provisions of section 54F in relation to capital gains on transfer of asset other than a residential house? [Dec. 2011] [5 Marks]

7.4

PART I : DIRECT TAX

Q.9 Rupesh acquired a residential house on 01-09-2001 for ` 10,00,000.

He spent ` 2,50,000 on 01-07-2003 and on 15-11-2008 ` 5,00,000 on improvement of this house property. He sold the house on 30-11-2023 for ` 80,00,000. Expenses on transfer (sale) were 2% of sales consideration.

Compute Capital Gain for the Assessment Year 2024-25.

Cost inflation indexes are as under: 2001-02 = 100, 2003-04 = 109, 200809 = 137, 2023-24 = 348.

[Dec. 2009] [5 Marks] Ans.: Particulars

(`)

Net Sale Proceed of the House (` 80,00,000 – ` 1,60,000)

78,40,000

Less: Indexed Cost of Acquisition: 1. ` 10,00,000 × 348/100 = ` 34,80,000

TAXMANN®

2. ` 2,50,000 × 348/109 = ` 7,98,165 3. ` 5,00,000 × 348/137 = ` 12,70,073

(55,48,238)

Long Term Capital Gain

22,91,762

Q.10 Vinod sells the following assets on 10th January, 2024.

Equity Shares in R Ltd. (`)

Jewellery (`)

Plot of Land (`)

Goodwill of a Business (SelfGenerated) (`)

Sale Consideration

6,00,000

7,50,000

25,00,000

25,00,000

Cost of Acquisition

40,000

80,000

2,50,000

NIL

Transfer Expenses

4,000

Date of Acquisition

04-05-2001

25,000 04-03-2008

04-02-2003

Based on the following indices, Compute the amount of Capital Gain of Vinod for the Assessment Year 2024-25 taking into consideration the facts that the business was set up in November 2009 and that he purchased a plot of land for ` 8,00,000 and Jewellery for ` 2,00,000 on 10th March, 2024.

Cost inflation index for various years are 2001-02 = 100, 2002-03 = 105, 2007-08 = 129, 2023-24 = 348.

[Dec. 2010] [5 Marks] Ans.: Computation of Capital Gain of Vinod for Assessment Year 2024-25 Particulars

(`)

1. Equity Shares: Sale Consideration

6,00,000

Less: Transfer Expenses (deemed on sales)

(4,000)

(`)

7.5

CH. 7 : CAPITAL GAINS

Particulars

(`)

(`)

5,96,000 Less: Indexed Cost of Acquisition (40,000 × 348/100)

(1,39,200)

4,56,800

2. Jewellery: Sales Consideration Less: Indexed Cost of Acquisition (80,000 × 348/129)

7,50,000 (2,15,814)

5,34,186

3. Plot of Land: Sale Consideration

25,00,000

Less: Transfer Expenses (deemed on sales)

(25,000) 24,75,000

Less: Indexed Cost of Acquisition (2,50,000 × 348/105)

(8,28,571)

16,46,429

4. Self-Generated Goodwill:

25,00,000

Long Term Capital Gain

51,37,415

Ans.: Computation of Income from Capital Gain of Deepak for Assessment Year 2024-25 Particulars

(`)

Sale Proceeds of 800 Shares @100

80,000

Less: Cost of Debentures Converted into Shares (200 shares × ` 50)

(10,000)

Short Term Capital Gain

70,000

Q.12 Kundan sold his properties during the financial year 2023-24 as under: (i) Household TV and refrigerator, costing ` 56,000 purchased in January, 2012, sold in February, 2024 for ` 70,000. (ii) A car sold on 1st December, 2023 for ` 2,00,000 which was purchased by him in January, 2021 for ` 3,00,000 and its written down value on 1st April, 2023 was ` 1,72,000. The car is used for business purposes.

TAXMANN®

Q.11 Deepak acquired 200 listed debentures of ` 100 each on 15th May, 2017. 50% value of each debenture was converted into 4 listed equity shares of the face value of ` 10 each on 20th August, 2022. Deepak, therefore, received 800 shares of face value of ` 10 each and was left with 200 debentures of ` 50 each. The shares were sold on 15th June, 2023 @ ` 100 per share through recognized stock exchange and Deepak paid ` 800 as security transaction tax.

Compute the amount of Capital Gain of Deepak for the Assessment Year 2024-25.

[Dec. 2012 old] [5 Marks]

7.6

PART I : DIRECT TAX

(iii) Agricultural land was sold for ` 9,50,000 on 1st February, 2024, its purchase price in 1993-94 was ` 1,00,000. He purchased new land for his own cultivation for ` 5,00,000 in May, 2023. Fair Market Value on 1-4-2001 was ` 2,80,000. (iv) Gold ornaments acquired in July, 2018 for ` 2,00,000 were sold for ` 2,40,000 in June, 2023. (v) Let out residential house at Indore was inherited by him in 1975.

Sale price on 30th November, 2023: ` 16,00,000; fair market value on 1st April, 2001: ` 4,00,000; cost of improvement during 2008-09: ` 1,00,000; and expenses on transfer: ` 32,000.

Compute his Taxable Capital Gains for the Assessment Year 2024-25.

The Cost inflation indices: 100 (2001-02); 137 (2008-09); 184 (2011-12); 280 (2018-19); 301 (2020-21) and 348 (2023-24). [June 2012] [7 Marks] Ans.:

TAXMANN®

Computation of Taxable Capital Gains of Kundan for the Assessment Year 2024-25 Particulars 1.

Details (`)

Car used for Business Purposes: Sale proceeds

2,00,000

Less: Written down value as on April 1, 2023

(1,72,000) 28,000

Short Term Capital gain (Under section 50) 2.

Gold Ornaments: Sale proceeds Less: Indexed cost of acquisition (2,00,000 ×

3,00,000

348 ) 280

(2,48,571) 51,429

Long Term Capital gain 3.

Residential House: Net Sale proceeds (` 16,00,000 – ` 32,000) Less: Indexed cost of acquisition (4,00,000 ×

15,68,000

348 ) 100

Less: Indexed cost of improvement (1,00,000 × 4.

(`)

348 ) 137

(13,92,000) (2,54,015)

Total Long Term Capital Gain (Loss)

Taxable Capital Gains: (a) Long Term Capital gain (51,429 + 78,015) = Loss 26,586 (b) Short Term Capital gain = ` 28,000

(78,015) (26,586)

7.7

CH. 7 : CAPITAL GAINS

Q.13 From the following information, compute the Taxable Capital Gains of Sanjay: - He sold his self-generated goodwill for ` 15,00,000 after using it for six years. He spent ` 1,50,000 for the development of the goodwill.

- The bonus shares (not listed) held by him in RK Limited were sold for ` 4,20,000 on 28th March, 2024. The face value of the shares which were allotted in May 2023 was ` 2,50,000.

- Short term capital loss from the transfer of building used for his business ` 1,00,000.

- A car purchased by him for ` 5,00,000 in 2015-16 for personal use, was sold on 1st July 2023 for ` 2,10,000.

[Dec. 2012] [5 Marks] Ans.: Computation of Capital Gains of Sanjay for Assessment Year 2024-25 Particulars

(`)

(`)

1. Long Term Capital Gain: 15,00,000

Less: Expenses for development of Goodwill

(1,50,000)

13,50,000

2. Short Term Capital Gain: Sale of bonus shares allotted in May 2023 Less: Short term capital loss from transfer of a building used for his business

4,20,000 (1,00,000)

Total Capital Gain

3,20,000 16,70,000

Q.14 Ram purchased a house property for ` 76,000 on 30th June, 1987.

The following expenses were incurred by him for making addition/alteration to the house property: S. No. Particulars

(`)

1.

Cost of construction of first floor in 1995-96

1,10,000

2.

Cost of construction of second floor in 2003-04

40,000

3.

Construction of third floor in 2012-13

90,000

4.

Fair market value of the property on 1st April, 2001

5.

The house property is sold by him on 15th June, 2023 for ` 20,00,000 (expenses incurred on transfer ` 40,000)

4,00,000

Compute the amount of Capital Gains chargeable to tax for the Assessment Year 2024-25.

Cost Inflation Indices: 2001-02 = 100, 2003-04 = 109, 2012-13 = 200, 2023-24 = 348 [June 2013] [5 Marks]

TAXMANN®

Sale of self-generated Goodwill

7.8

PART I : DIRECT TAX

Ans.: Computation of Capital Gains Chargeable to tax of Ram for Assessment Year 2024-25 Particulars

(`)

1. Net Sale Proceeds of house (` 20,00,000 – ` 40,000)

(`) 19,60,000

2. Less: Indexed cost of acquisition/Additions (i) Fair Market Value as on 01-04-2001 (` 4,00,000 × 348/100)

13,92,000

(ii) Construction of Second floor in 2003-04 (` 40,000 × 348/109)

1,27,706

(iii) Construction of third floor in 2012-13 (` 90,000 × 348/200)

1,56,600

TAXMANN®

3. Long Term Capital Gain (taxable)

(16,76,306) 2,83,694

Q.15 M & Sons, a Hindu Undivided Family (HUF), had purchased a land for ` 1,50,000 in 2006-07. In the Previous Year 2010-11, a partition took place and the coparcener, B, gets this plot valued at ` 2,00,000. In Previous Year 2011-12 he incurs expenses of ` 2,50,000 on the plot towards fencing of the plot of land. B then sells this plot at ` 15,00,000/- in Previous Year 2023-24. You are required to compute the Capital Gains for Assessment Year 2024-25.

Cost Inflation Index (CII): 2006-07 = 122, 2011-12 = 184, 2023-24 = 348.

[June 2019] [4 Marks] Ans.: Computation of Capital Gain for Assessment Year 2024-25 Particulars

(`)

Full Value of Consideration

15,00,000

Less: Indexed Cost of Acquisition (` 1,50,000 × 348/122)

(4,27,869)

Less: Indexed Cost of Improvement (` 2,50,000 × 348/184)

(4,72,826)

Long Term Capital Gain

5,99,305

Q.16 Rakshit whose house property was compulsorily acquired in the year 2017 received enhanced compensation of ` 9,00,000 on 15th November, 2023 which includes ` 2,40,000 as interest on such enhanced compensation. Discuss the taxability of such compensation. [June 2011] [5 Marks] Ans.: Enhanced Compensation granted by a court of law in respect of house property compulsory acquired in the year 2017, received on 15th November 2023 is fully taxable as Long Term Capital Gain (` 6,60,000) alongwith 50% interest (` 1,20,000 as Income from Other Sources) under section 57(iv) in the previous

7.9

CH. 7 : CAPITAL GAINS

year 2023-24. In this case cost of acquisition will be taken as nil. However litigation expenses (if any) are deductible (if any). In case of Mr. Rakshit Amount received is taxable as mentioned above.

Q.17 On 31st December, 1996, Goverdhan purchased a Plot for ` 40,000.

The Fair Market Value of the Plot on 1st April, 2001 was ` 97,800. On 15th October, 2023. Goverdhan sells the Plot for ` 14,30,000 and paid brokerage etc. @ 2% on sales consideration. He invested ` 6,87,000 in the construction of residential house which was completed before 31st May, 2024.

Compute the Taxable Amount of Capital Gains for the Assessment Year 2024-25 of Goverdhan assuming that he already owns one residential house on the date of transfer of Plot.

Cost Inflation Index: Financial Year 2023-24 = 348.

[June 2011] [7 Marks] Ans.: Computation of Taxable amount of Capital Gain of Goverdhan for Assessment Year 2024-25 Particulars

(`) 14,01,400

Less: Indexed Cost of Acquisition (` 97,800 × 348/100)

(3,40,344)

Long Term Capital Gain

10,61,256

Less: Exemption under section 54F (Capital Gain × Cost of New House/ Net Sales Consideration)=(10,61,256 × 6,87,000/14,01,400)

(5,20,253)

Taxable Long Term Capital Gain

5,41,003

Q.18 Ramesh, aged 66 years, sold a residential house at Pune for ` 30,00,000 on 1st October, 2023. This house was acquired by his father on 1st January, 1991 for ` 1,00,000. On the death of his father, he inherited the house on 5th July, 2009 fair market value of the house as on 1st April, 2001 was ` 5,00,000. He paid brokerage @ 1% to the real estate agent at the time of sale. He purchased a residential house at Baramati on 7th January, 2024 for ` 8,00,000 and on 20th February, 2024 purchased bonds of ` 3,00,000 (redeemable after 5 years) of Rural Electrification Corporation Limited.

His other incomes are ` 50,000. He deposited ` 10,000 in Public Provident Fund.

Compute the Taxable Income and Tax Liability of Ramesh for the Assessment Year 2024-25.

Cost Inflation Indices: 2001-02 = 100, 2009-10 = 148, 2023-24 = 348.

[Dec. 2011] [5 Marks]

TAXMANN®

Net Sale Proceeds of the Plot (` 14,30,000 – 28,600)

7.10

PART I : DIRECT TAX

Ans.: Computation of Taxable Income and Tax Liability of Ramesh aged 66 years for Assessment Year 2024-25 Particulars

(`)

(`)

1. Capital Gains: Net Sale proceeds of Residential House (` 30,00,000 – ` 30,000)

29,70,000

Less: Indexed Cost of Acquisition (` 5,00,000 × 348/100)

(17,40,000)

Gross Long Term Capital Gain

12,30,000

Less: Exemption u/s 54 – (Cost of another house purchased)

(8,00,000)

Less: Exemption u/s 54EC – (Purchase of bonds of Rural Electrification Corporation Limited)

(3,00,000)

TAXMANN®

2. Income From Other Sources:

1,30,000 50,000

3. Gross Total Income

1,80,000

4. Less: Deductions under section 80C – Public Provident Fund

(10,000)

5. Total Income

1,70,000

6. Tax Liability

NIL

Q.19 Mr. Subramani sold a house plot to Mrs. Vimala for ` 42 lakhs on 12-5-2023. The valuation determined by the stamp valuation authority was ` 53 lakhs. Discuss the tax consequences of above, in the hands of each one of them, viz., Mr. Subramani & Mrs. Vimala. Mrs. Vimala has sold this plot to Ms. Padmaja on 21-3-2024 for ` 55 lakhs. The valuation as per stamp valuation authority remains the, same at ` 53 lakhs.

Compute the capital gains arising on sale of the house plot by Mrs. Vimala.

Note: None of the parties viz. Mr. Subramani, Mrs. Vimala & Ms. Padmajaare related to each other, the transactions are between outsiders.

[CA Nov. 2018] [6 Marks] Ans.: Tax consequences in the hands of Mr. Subramani Particulars

Relevant Provisions

Section 50C

If the consideration received on transfer of capital asset being land or building or both is less than stamp duty value (as per Stamp Duty Valuation Authority), in that case the stamp duty value is treated as full value of consideration.

In this case Mr. Subramani sold the house for ` 42 Lakhs which is less than ` 53 Lakhs (Stamp Duty Value). Hence ` 53 Lakhs is treated as full value of consideration for Mr. Subramani.

7.11

CH. 7 : CAPITAL GAINS

Tax consequences in the hands of Mrs. Vimala Particulars

Relevant Provisions

Section 56(2)(x) clause (a)

Any Property/Money received by way of Gift without consideration the aggregate value of which exceeds ` 50,000/-, the whole of the aggregate value of such sum is taxable.

Section 56(2)(x) clause (b)

u Any Immovable Property received without consideration, the stamp duty value of which exceeds ` 50,000/- then value of the property will be stamp duty value of such property. u With effect from 31.03.2019, any Immovable Property received for consideration and the amount of such excess is more than the higher of the following amounts (i) the amount of ` 50,000 and (ii) the amount equal to 10% of consideration then stamp duty value of such property as exceeds such consideration is value of such property.

Case

Hence as per section 56(2)(x), in this case Mrs. Vimala purchased the house for ` 42 Lakhs which is less than ` 53 Lakhs being stamp duty value. Therefore difference of ` 11 Lacs (` 53 Lacs- ` 42 Lacs) is taxable in the head Income from Other Sources.

Computation of Taxable Capital Gain in the hands of Mrs. Vimala Assessment Year 2024-25

Particulars

Amount (`)

Gross Value of Consideration

55,00,000

Less: Cost of Acquisition

53,00,000

Taxable Short Term Capital Gain

2,00,000

Q.20 Mr. Selvan, acquired a residential house in December 2005 for ` 11,00,000 and made some improvements by way of additional construction to the house, incurring expenditure of ` 3,00,000 in October, 2010. He sold the house property in November, 2023 for ` 70,00,000.

The value of property was adopted as ` 85,00,000 by the State Stamp Valuation Authority for registration purpose. He acquired a residential house in January. 2024 for ` 25,00,000. He deposited ` 20,00,000 in capital gains bonds issued by National Highways Authority of India (NHAI) in September, 2024.

Compute the capital gain chargeable to tax for the assessment year 2024-25.

TAXMANN®

u If any person receives any immovable property for a consideration which is less than the stamp duty value then excess amount shall be considered as gift in the hands of recipient.

7.12

PART I : DIRECT TAX

What would be the tax consequence and in which assessment year it would be taxable, if the house property acquired in January, 2024 is sold for ` 40,00,000 in March, 2025?

Cost Inflation Index: Financial Year 2005-2006 = 117, 2010-2011 = 167, 2023-24 = 348.

[CA Nov. 2011] [8 Marks] Ans.: Computation of Taxable Capital Gain in the hands of Mr. Selvan Assessment Year 2024-25 Particulars

Amount (`)

Gross Sale Consideration (Being Stamp Duty Value) Less: Indexed Cost of Acquisition (11,00,000×348/117) Less: Indexed Cost of Acquisition – Additional Construction (3,00,000 × 348/167)

TAXMANN®

Long term Capital Gain

Amount (`) 85,00,000

32,71,795

6,25,150

(38,96,945) 46,03,055

Less: Sec. 54 Purchase of New Residential House

(25,00,000)

Taxable Long term Capital Gain

21,03,055

Notes: 1. The Gross Sale Consideration is taken as per Stamp Valuation Authority of the house as ` 85,00,000 which is higher than 110% of the actual sale consideration of ` 70,00,000.

2. Section 54EC is not allowed as deduction. NHAI bonds are purchased after 6 months from the date of transfer of the house.

3. If the house property acquired in January 2024 for ` 25 Lakhs is sold for ` 40 Lakhs in March 2025 i.e. within 3 years of its acquisition, exemption already granted under section 54 for ` 25 lakhs will be taken back. Thereafter for calculating capital gain on transfer of new house in March 2025 for ` 40 lakhs (Purchased in January 2024 for ` 25 Lakhs), cost of acquisition will be calculated as original cost of acquisition minus exemption availed under section 54. In the instant case it comes to zero.

Hence total sale proceeds of new house ` 40 Lakhs are taxable as Short Term Capital Gain.

Q.21 Mr. A is a proprietor of Akash Enterprises having 2 units. He transferred on 1.4.2023 his unit 1 by way of slump sale for a total consideration at ` 26 Lakhs. The expenses incurred for this transfer were ` 28,000. His Balance Sheet as on 31.3.2023 is as under:

7.13

CH. 7 : CAPITAL GAINS Liabilities

Total

Assets

Unit 1

Unit 2

Total

`

`

`

` Own Capital

15,00,000

12,00,000

2,00,000 14,00,000

Revaluation Reserve (For Building of Unit 1)

3,00,000 Machinery

Building

3,00,000

1,00,000

4,00,000

Bank Loan (70% for Unit 1)

2,00,000 Debtors

1,00,000

40,000

1,40,000

Trade Creditors (25% for Unit 1)

1,50,000 Other Assets

1,50,000

60,000

2,10,000

Total

21,50,000

17,50,000

4,00,000 21,50,000

Other information: (i) Revaluation reserve is created by revising upward the value of the building of unit 1. (ii) No individual value of any asset is considered in the transfer deed. (iii) Other assets of unit 1 include patents acquired on 1.7.2021 for ` 50,000/- on which no depreciation has been charged.

Compute the capital gain for the assessment year 2024-25.

[CA Nov. 2010] [5 Marks] Computation of Capital Gain of Unit 1 on Slump Sale Assessment Year 2024-25 Particulars

Amount

Amount

Gross Sale Consideration Received

26,00,000

Less: Expenses incurred for this transfer

(28,000)

Net Sale Consideration

25,72,000

Less: Cost of Acquisition (Working Note 6)

12,50,625

Taxable Long-term Capital Gain

13,21,375

Notes: 1. Indexation is not done in case of Depreciable Assets under Slump Sale.

2. Depreciation on patents is equal to 25% per annum, written down value method. Date of acquisition 01.07.2021. Book value as on 31.03.2023 = ` 50,000 × 0.75 × 0.75 = ` 28,125 3. Value of bank loan = 2,00,000 × 0.70 = ` 1,40,000 4. Value of trade creditors = ` 1,50,000 × 0.25 = ` 37,500 5. Net Worth of the Akash Enterprises unit 1 is treated as cost of acquisition.

6. Net Worth

TAXMANN®

Ans.:

7.14

PART I : DIRECT TAX

Note 6Total assets: Building

12,00,000

Less: Revaluation reserve

3,00,000

9,00,000 3,00,000

Machinery Patents (Note 2)

28,125

Debtors

1,00,000

Other Assets

1,50,000

Less: Patents

50,000

(A) Total Assets

1,00,000 14,28,000

Total liabilities Bank loan (Note 3) Trade creditors

TAXMANN®

(B) Total Liabilities (C) Net worth (A-B)

1,40,000 37,500 1,77,500

1,77,500 12,50,625

Q.22 Ajay, a property dealer, entered into an agreement with Mukesh to sell a plot on 6th April, 2023 for ` 55 lakh. He received an advance of ` 12 lakhs from him on the date of agreement by account payee cheque.

Transfer took place on 12th September, 2023. The Valuation determined by the stamp valuation authority on the date of agreement and date of transfer was ` 59 Lakhs and ` 63 Lakhs, respectively. Mukesh has sold this plot to Deepti on 24th March, 2024 for 65 Lakhs. The valuation as per stamp valuation authority was ` 64 Lakhs on 24th March 2024.

Discuss the tax consequences of above, in the hands of Ajay and Mukesh.

Also compute the capital gain in the hands of Mukesh.

Note: none of the parties viz. Ajay, Mukesh and Deepti are related to each other the transactions are between outsiders.

[Dec. 2023] [5 Marks] Ans.: Computation of Capital Gain of Mukesh Sales consideration (On 24.03.2024)

65,00,000

Less: Cost of Acquisition (On 12.09.2023)

55,00,000

Short Term Capital Gain

10,00,000

Note: Since difference in purchase/sale price is within 110% of stamp duty value, there is no additional tax liability on Ajay, Mukesh and Deepti.

Tax Laws & Practice (Tax) | CRACKER | AY 2024-25 AUTHOR PUBLISHER DATE OF PUBLICATION EDITION ISBN NO NO. OF PAGES BINDING TYPE

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K.M. BANSAL, SANJAY KUMAR BANSAL TAXMANN FEBRUARY 2024 2ND EDITION 9789357786942 380 PAPERBACK

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