CAPITAL GAINS Illustration 1 Determine the amount of taxable capital gains in respect of the following transaction : M sells a residential

house property in Pune for Rs. 20,30,000 on Oct, 2009 which was purchased by him on April , 1986 for Rs. 1,90,000. Illustration 2 On November, 2009, M Silver for Rs. 3, 02,000 (cost of acquisition on March , 1993: Rs.2,00,00). Expenses on purchase and transfer are Rs. 1,100 and 2,000 respectively. Find out the amount of capital gains if any. Illustration 3 X sells the following capital asset during the Assessment year 2010-11 House Rs. Sale consideration 12,00,000 Year of acquisition 1990-91 Cost of acquisition 1,00,000 Cost of improvement incurred in 1994-95 1,05,407 Illustration 4 M owns a residential house at Pune since 1969 (income is taxable under section 22). The house is sold by him for Rs. 50,50,000 on September 30,2009 (cost of acquisition : Rs. 5,00,000, fair market value on April 1, 1981 7,10,000). Determine the amount of capital gains chargeable to tax. Illustration 5 G purchases a house property for Rs. 1,30,000 on June , 1966 He gets the first floor of the house constructed in 1965-66 by spending Rs. 20,000. He dies on December 22, 1980. The property is transferred to Mrs. G by his will. Mrs. G spends Rs. 25,000 and Rs. 26,700 during 1979-80 and 2000-01 respectively for reconstruction of the property. Mrs. G sells the house property for Rs. 22,15,000 on February 15, 2010. Brokerage paid by Mrs. G is Rs. 12,500. The fair market value of the house on April 1, 1981 is Rs. 3,60,000. Ascertain capital gains. Illustration 6 X purchases a property on May, 1965 for Rs. 50,000. Later on he gifts the property to his friend Y on June 10,19991. The following expenses are incurred by X and Y for renewals of the property. Particulars RS Addition of one room by X during 197830,000 79 Addition of two room by X during 2001- 1,40,000 1

02 Addition of four room by X during 200304

2,50,000

The fair market value of the property as 1/4/1981 is 65,000. The house property is sold for Rs 10.00.000 on 1/6/2009 Illustration 7 ( X owns the following shares ( Particulars Cost of acquisition Rs 3,40,000 Date of acquisition- 10-31998 These shares are gifted by X to his son Y on April 1, 1998. On August, 2009, these assets are sold by Y for Rs. 2,20,000. Compute the capital gain chargeable to tax in the hands of Y for the assessment year 2010-11.

Illustration 8 Mr Ketanbhai acquires shares in Global Ltd. On 1-5-1989 for Rs. 2,50,000, as an investment. He starts a share brokerage firm Gafla & Co. on 1-8-1994 and converts the above shares as stock-in-trade on this date. The fair market value of these shares on 1-81994 is Rs. 6,00,000. He sells these shares on 1-8-2009 for Rs. 12,00,000. (b) What would be the taxability, if these shares are not sold but held as stock-in-trade as on 31-3-2010? Illustration 9 Huzefa Ltd. has an industrial undertaking in New Bombay. An industrial plot owned by the company (cost of acquisition in 1986-87 : Rs. 2,00,000) is compulsorily acquired by the Government of Maharashtra on December , 2007. The State Government pays Rs. 15,00,000 on March, 2010 as compensation under an award. Determine the amount of capital gains chargeable to tax. Illustration 10 The Central Government acquires the property of Mr. Jayakishan on August 1999. It was purchased by him on 1-7-1994 for Rs. 4,78,000. He had incurred expenses of Rs. 1,92,500 on making capital alterations to it during May 1999. A compensation of Rs. 12,00,000 was awarded to Mr. Jaykishan, which he received on 1-7-2000. He filed a suit against the Government for increasing the amount of compensation. The High Court increased the compensation by Rs. 2, 00,000 on 12

7-2007 which was actually received by Mr. Jaykishan on 1-1-2010. He had incurred Rs. 10,000 as legal expenses in this connection. Calculate the amount of taxable capital gains.. Illustration 11 M owns two machines (A) and (B) eligible for depreciation at 25%. The WDV of these machines on 1-4-2009 was Rs. 65,000 and Rs. 50,000 respectively. Find out the capital gains, if any, in the following alternative cases: (1) Another machine (C) rate of depreciation 25%, costing Rs. 2,30,000 was added during the year 2009-10. Machine (A) was sold for Rs. 4,75,000. (2) In case (1), assume that Machine (A) was sold for Rs. 12,90,000. (3) There were no additions during the year. Both the machines (A) and (B) were sold for Rs. 1,75,000. (4) In case (3), assume that both the machines were sold for Rs. 70,000 . Illustration : 12 Compute the capital gains in the following cases: (1) M commenced business on 1-5-1982. He sold this business on 1-7-2010 and received, inter-alia (among others), Rs. 15,00,000 towards goodwill. (2) M had acquired a business from V on 1-4-1992 by paying Rs. 4,00,000 towards goodwill. He sold this business on 1-4-2010 and received Rs. 15,00,000 towards goodwill. (3) M is staying in a rented flat since July 1995. The land-lord paid Rs. 12,00,000 to M as compensation for surrender of tenancy, in June 2010 (4) M purchased tenancy rights on 1-7-1982 for Rs. 3,50,000. He transferred the tenancy rights on 1-6-2010 for Rs. 18,50,000. (5) V is a lawyer practising in Mumbai since 1985. He transfers his practice to G on 158-2009 and charges Rs.17,50,000 towards goodwill. Illustration : 13 M, a non-resident Indian remits US$ 50,000 to India on September 16, 1990. The amount is partly utitised on October , 1990 for purchasing 20,000 shares in A Ltd., an Indian Company at the rate of Rs. 14 per share. These shares are sold for Rs. 30 per share on January 30, 2010.Expenses on transfer Rs 2 per share. You are required to compute capital gains chargeable to tax for the assessment year 200910 on the assumption that the telegraphic transfer buying and selling rate of USS adopted by the State Bank of India were as follows: Date Buying (1 US$) Selling (1 US$) 16-09-1989 20 22 03-10-1989 23 25 30-01-2010 30 31

Illustration: 14 3

X holds 1000 equity shares in A Ltd since 1979 ( cost of acquisition : Rs 20,000, fairmarket value of the property on Aprril1 , 1981 is Rs 18,000). A Ltd offers Bonus shares of 800 shares on April 1. 1984. A Ltd offers 2000 right shares of Rs 10 each to X on September, 2009 at a premium of Rs 50 . X subscribes right shares and renounces 1200 shares in favour of C by transferring the right entitlement for a consideration of Rs 4,800. X sells 2600 shares in A LTD on March 30, 2010 @ Rs 90 per share.

Q1) Under sec 54, the new residential property can be purchased within 2 years or 3 years from the date of transfer of original asset. The tax payer have to submit the return of income by July 31 or September 30.If the amount is not utilized for purchase of new purchase or construction of new house till due date of submission of return of income then it should be deposited under capital gain account scheme before the due date. If the amount is not fully utilized, then the amount of unutilized money would be regarded as long term capital gain. Sec 54: Particulars Date of transfer Date of purchase Sale consideration Cost of acquisition Expense on transfer To get the benefit of exemption under sec 54, the following residential properties were purchased Date of purchase Cost of acquisition X and Y transfer property in Noida as follows Particulars Date of transfer Date of purchase Sale consideration Cost of acquisition Expense on transfer Amount deposited in capital gain account scheme To get the benefit of exemption under sec 54, the following residential properties were purchased Date of purchase

X October . 2009 January 6, 1984 Rs 28,00,000 Rs 2,00,000 15,000

Y November, 2009 March 1999 10,00,000 1,90,000 7,000

October 10, 2011 9,00,000 2,90,000 on April 10, 2012

March 1, 2009 6,00,000 16,85,000 on May 20, 2013

X January, 2010 October, 1992 Rs 45,00,000 Rs 9,50,000 40,000 25,00,000

Y September , 2009 March, 1996 Rs 28,00,000 Rs 5,20,000 22,000 20,00,000

June 20, 2011

March 1, 2012 4

Cost of acquisition SEC 54 B

15,00,000

9,00,000

X sells agricultural land within the municipal limit of Calcutta for Rs 66,00,000 on August 2009, which was purchased by him on April 1, 1989 for Rs 4,00,000. On November 15, 2009 he purchased agricultural land in rural area for Rs 6,00,000 and deposit Rs 22,80,000 in a deposit scheme for availing the benefit under SEC 54B. He purchased another agricultural land (situated within limit of Delhi municipal corporation ) on June 30, 2011 for Rs 20,00,000 by withdrawing from the deposit account . Amount left in deposit account is withdrawn on July 10, 2012. The agricultural land in rural area is transferred on April 1, 2012 for Rs 6,00,000 and land in Delhi is transferred on July 17, 2012 for Rs 8,70,000. Determine capital gain. SEC: 54 D X Ltd a manufacturing co, purchases a factory building on Nov 6, 1999 for Rs 30 Lac. The building is compulsory acquired by the government on October 20, 2009 for which a sum Rs 66 Lac is paid as compensation on January13, 2010.Compute the capital gain chargeable to tax for assessment year 2010-11, taking into consideration the following information1.On April 1, 2008 the company owns two building (rate of depreciation: 10%) one of which is compulsory acquired 2009-10. The depreciated block of the asset as on April1, 2009 is Rs 20 Lacs. 2,The company purchased the factory building on April 6, 2010 Rs 12 Lacs. Will your answer differ if the factory building was acquired on March31, 2010

Sec 54 EC On January 2, 2010, X sells gold for Rs. 4,85,000 (Cost of acquisition on April 10, 1995: Rs. 1,15,000). Expenses on purchase and transfer are Rs. 300 and 400 respectively. On June 30, 2009, he acquires bonds of National Highways Authority of India (investment being Rs. 40,000). These bonds are redeemable after 30 months. Find out the amount of exemption under section 54EC. X Ltd. sells the following assetsLand Date of sale Date of acquisition Sale consideration November 30, 2009 Oct 2, 1982 Rs 6,00,000

Bonus shares March 1, 2010 April 6, 1985 Rs. 3,50,000

House property (let out) November 13, 2009 July 6, 1985 Rs. 5,00,000 5

Purchase consideration 2,20,000 Nil 1,00,000 The agricultural land is situated in urban area and used for agricultural purpose since 1994. X Ltd. Invest in the following assets during April 2010 1. Bonds of the national highways authority of India (redeemable on June 1, 2014) Rs. 6, 00,000. 2. Non-convertible debentures (redeemable on May 10, 2015 of the Rural Electrification Corporation: Rs. 5 00,000). Find out the capital gains chargeable to tax. Sec 54 F: Particulars Date of transfer of shares Date of purchase Sale consideration Cost of acquisition Expense on transfer To get the benefit of exemption under sec 54 F,the following residential properties were purchased at pune Date of purchase Cost of acquisition X and Y transfer property in pune as follows

X Oct, 2009 July, 1981 Rs 20,00,000 Rs 5,00,000 Rs 1,00,000

Y February 15, 2010 June 18, 1981 13,14,000 77,000 14,000

May 12, 2009 January 3, 2010 30,00,000 8,50,000 Rs 35,00,000 on June 29, Rs 14, 70,000 on January 1, 2011 2014

Sec 54 F: X sells (non-listed ) shares in a private sector company for Rs 10,00,000 on July 2009 (cost of acquisition on June 15, 1984 : Rs 2,00,000, expense on transfer Rs 5,000). On July 10, 2009, he wants to buy one residential house property . To get the benefit of exemption under SEC 54 F,X deposits on May 30, 2010 Rs 4,00,000 in capital gain account scheme. By withdrawing from the capital gain account scheme. He purchased a residential property at Delhi on July 6, 2011 for Rs 3,80,000. Ascertain the amount of capital gain. SEC 54 G X Ltd. Owns on industrial undertaking at Kanpur which is situated in urban area. As per policy of the State Government, the industrial undertaking is shifted to a rural area. In the process of shifting, the company sells the following assets. Plant and machinery 15 per cent Building 10 per cent Furniture 10 per cent Land 6

Rate of depreciation

Year of acquisition Written down value of the block on April 1, 2009 Cost of acquisition of land (fair market value on April 1, 1981: Rs. 60,000) Sale proceed (date of sale June 25, 2009) Cost of assets acquired during AprilMay 2010 for the purpose of shifting the undertaking to a rural area.

1977 10,50,000 48,80,000 45,00,000

1978 9,75,000 89,00,000 5,00,000

1976 2,25,000 18,00,000 4,00,000

1975 50,000 70,00,000 60,00,000