“THE YEAR OF ACQUISITION WHEN PROPERTY RECEIVED UNDER WILL IS SOLD?”

TAX TALK-16.07.2012-THE HITAVADA

TAX TALK

BY CA. NARESH JAKHOTIA (Chartered Accountant)

“THE YEAR OF ACQUISITION WHEN PROPERTY RECEIVED UNDER WILL IS SOLD?”

Query 1]

Sir, kindly guide me in the following matter. The basic threshold income which was not chargeable to tax for F.Y 11-12 (A.Y 12-13) is Rs 2.50 Lacs for senior citizen (those who are 60 years of age and above). Now in budget 2012, limits of incomes are revised. Accordingly now what is the limit for senior citizens for F.Y 12-13 (A.Y 13-14)? Kindly clarify. [nikhil.143gotenssj4@gmail.com]

Opinion:

1.      The new income tax slab for the F.Y. 2012-13 (AY: 2013-14) for Individual / HUF is as under:

Individuals/HUF	Senior Citizens	Very Senior Citizens	Rate
Up to 200000	Up to 250000	Up to 500000	Nil
200000-500000	250000-500000	--	10%
500000-1000000	500000-1000000	500000-1000000	20%
Above 1000000	Above 1000000	Above 1000000	30%

2.      There will be no separate category for woman assessee for the FY 2012-13.

3.      Eligible age for senior citizen is 60 years and for very senior citizens is 80 years.

4.      Education Cess (including Higher Education Cess) is same @3% on income tax.

Query 2]

My grandfather purchased a plot in 1952. 1/3^rd plot was purchased & 2/3^rd was on lease from municipal corporation. He built building on the same in which ground floor was for commercial purpose while upper 2 floors were residential.
My grandfather expired in 1982 & by his "WILL" entire plot was transferred to my grandmother. Now my grandmother expired in Dec 2009 & by her "WILL" it was transferred to my mother. Now, we have decided to sell the said property.
My queries are:

1.      Which year property index will be considered for calculating Capital gain of my Mother? For 1/3^rd plot, whether it will be of 1982 or 2009?

2.      As 2/3^rd plot is on lease, Stamp duty notional value is calculated at current market rate. So, for calculating capital gain, whether notional market value will be considered or Ash value of the building will be considered?

Kindly advice. [Nirav Vora - nvmarketing.akola@gmail.com]

Opinion:

1.      The property to be sold by your mother is an ancestral property acquired before 01.04.1981. Also, the construction/ addition in the property appear to have been completed before 01.04.1981. The fair market value of the property as on 01.04.1981 could be considered as cost of acquisition of house property for working out capital gain.

2.      The important question here is the year from which indexing benefit would be available? There is a controversy as to the year from which the indexation benefit would be available in such cases. There is a difference in the LITERAL interpretation vis a vis LOGICAL interpretation of the law on this issue. The literal interpretation says that the indexation benefit is available from the year “in which the assets is first owned by the assessee” (i.e., from 2009, in your case) whereas logically it should be same as is available to the original owner (i.e., 1981 in your case).
In view of the judgment in the case of Bombay High Court in CIT Vs. Manjula J. Shah (2012) 204 Taxman 691, I am of the opinion that the indexation benefit in your case would be available from the year 1981-82.

3.      For computing capital gain for both for 1/3^rd as well as 2/3^rd share of the property sold, the higher of the following would be taken as the value of sale consideration:
a] Actual Sale Consideration received or
b] Valuation adopted by the Registrar of stamp duty for levy of stamp duty

Query 3]

Sir, in the declaration ITR-V (after e-filling), there is a blank space after the word in my capacity. What does it mean & whether I have to fill the blank & sign the ITR-V? [Himansu Sekhar Muduli-himansubbsr@yahoo.co.in]

Opinion:

In the ITR-V (Acknowledgement) generated after e-filing of the income tax return, you have to fill the capacity in which the return is filed. It could be Director/ MD/Authorised Signatories etc in case of Company, Partner/ Authorised Signatories etc in case of firm, Karta in case of HUF, Individual in case of return filed by Individuals, etc.

If the return is e-filed without attaching a digital signature, then ensure to forward the duly signed hard copy of the acknowledgement at the following address:
“Income Tax Department-CPC, Bag No. 1, Electronic city post office, Bangalore-560100”.