Cost of acquisition
Querist :
Anonymous
(Querist) 26 September 2011
This query is : Resolved
Dear all,
Where the immovable property rural agriculture land(A) tranfered by way exchange to another rural land(B) for without consideration before 1st oct 2009 and subsequently sold .
what will the cost of acquisition in above transction ?
I found found following ref. is it correct?
Ref: Where the asset was acquired by way of exchange for another asset, the cost of .acquisition is the fair market value of that other asset as on the date of exchange.
Pl quote ref with particular section of IT act.
Thanks in advance for reply.
AK
Raj Kumar Makkad
(Expert) 26 September 2011
As the acquisition of land has been made by way of transfer of griculural land having similar value and no money ransaaction has taken place thereto so question arises to levy any income tax thereon.
Querist :
Anonymous
(Querist) 26 September 2011
Thanks Raj Kumar sir,
I would like to clarify you following.
1)Value of property as per stamp duty valuation are--
Property A-Rs 550000
poperty B-3000000
2)FAIR MARKET VALUE Written by parties in exchange sale deed for valuation purpose and no consideration .
Property A-Rs 550000
poperty B-565000
3)what will be cost of acquisiton if property B subsequently sold to rs 2600000.period of holding is short term.
what will be cost of acquisiton
thanks again in advance.
Querist :
Anonymous
(Querist) 26 September 2011
Sorry ,I wronly quoted. Property B is urban land situated in muncipalty area.
Raj Kumar Makkad
(Expert) 27 September 2011
The stamp duty is payable on the difference of value. One thing is clear, you cannot assess the value of property below the rates fixed by collector of area so better o obtain rate list and accordingly o ass the value and stamp duty.
prabhakar singh
(Expert) 27 September 2011
All said well and good but the tax that may be imposed here would be either SHORT AND/OR LONG TERM CAPITAL GAIN TAX,not the income tax.
R.Ramachandran
(Expert) 27 September 2011
Dear Anonymous,
You say that you read some where that : "Where the asset was acquired by way of exchange for another asset, the cost of acquisition is the fair market value of that other asset as on the date of exchange."
The above view is not correct.
The Definition of "transfer" as given in Sec. 2(47) of the I.T. Act, includes 'exchange'.
That means, even when you have exchanged your respective properties, what you have done is effected 'transfer' of your immovable properties as per Sec. 2(47) of the I.T. Act.
In respect of your property which you transferred (exchanged), you know the fair market value on the date of such 'exchange/transfer'.
In other words, the 'cost of acquisition' of the property that you acquired in exchange of your own property would be the fair market value of your property which you gave away.
Similar would be the position in regard to the person who acquired your property. For him the cost of acquisition would be the fair market value of his property which he exchanged with you.
Once the 'cost of acquisition' of your property is known (which is nothing but the fair market value of the property which you gave away), you will be able to arrive at the capital gains (whether long term or short term - depending upon which the property was acquired and when sold), and then calculate your capital gains tax liability as well.
Querist :
Anonymous
(Querist) 28 September 2011
Dear Ramchadran sir,
89[CHAPTER XX-A
ACQUISITION OF IMMOVABLE PROPERTIES IN CERTAIN CASES OF TRANSFER TO COUNTERACT EVASION OF TAX
Definitions.
269A. In this Chapter, unless the context otherwise requires,—
(a) 90[“apparent consideration”,—
(1) in relation to any immovable property transferred, being immovable property of the nature referred to in sub-clause (i) of clause (e), means,—]
(i) if the transfer is by way of sale, the consideration for such transfer as specified in the instrument of transfer ;
(ii) if the transfer is by way of exchange,—
(A) in a case where the consideration for the transfer consists of a thing or things only, the price that such thing or things would ordinarily fetch on sale in the open market on the date of execution of the instrument of transfer ;
(ii) in a case where the consideration for the transfer consists of a thing or things only, the price that such thing or things would ordinarily fetch on sale in the open market on the date of the transfer ;
also refer DTC ACT
