CAPITAL GAIN CALCULATION

[Haresh Raithatha]

One of our Client has purchased 1 property from Income tax Department Auction in the year 1998-98. The consideration paid for same was ₹ 5,00,000/-( Five Lacs) however Stamp duty of ₹ 2,45,000/-is paid as per Jantri value of the property as ₹ 50,00,000/-. (Fifty Lacs)

Now the property has been sold for ₹ 60,00,000/- however Stamp duty on sale has been paid as per jantri value i.e. for ₹ 70,00,000/-. At time of calculation capital gain on sale of property purchase value has been taken ₹ 5,00,000/-+245000/- i.e. consideration price plus Stamp Duty paid on acquisition and sale value was taken ₹ 60,00,000/-.

Now IT Department raised query regarding Sale value that the same should be taken as ₹ 70,00,000/- i.e. stamp duty paid value and not sale consideration received i.e. ₹ 60,00,000/-.

Can we apply the same criteria for purchase price consideration i.e. can we take purchase price (Cost of Acquisition) on basis of stamp duty value i.e. ₹ 50,00,000/- instead of ₹ 5,00,000/-?

[Prudhvi Jakkula]

No you can't take purchase value as 50,00,000. Because Sale value should be consideration received or stamp duty whichever is higher. But in case of purchase no such provision is there and actual cost of purchase should be taken for the purpose of computation of capital gains. Hence 5,00,000 should be taken. However you can take indexation benefit

AI Summary

Stamp duty valuation: sale consideration is the higher of actual receipt or stamp duty value; purchase uses actual cost. Sale consideration is treated as the higher of actual consideration received and stamp duty (jantri) value; however, cost of acquisition must be the actual purchase price paid by the buyer, with stamp duty paid on acquisition addable to the cost base and indexation benefit available for long term capital gains computation.