Capital Gain Tax Applicability

[Ethirajan Parthasarathy]

A person got two large sites by way of succession. In his absence in India, someone manipulated and sold both the sites.

In one site, the purchaser has constructed lot of apartments. The purchaser of other site has not developed it. Now the original owner has got the court judgement declaring him as lawful owner.

The purchaser of first site has come forward to give few apartments to the landowner as compensation.

My view the original owner is liable for paying capital gain tax @ 12.5% considering the SR value of super structure he got. Will section 78 (50C - Old Act) will apply to this transfer.

For the other site, the present owner is willing to return only half the site or same amount as compensation. What will be the tax effect and whether section 78 of the new Income Tax Act applies to this transaction also.

AI Summary

Capital gains on property settlements hinge on transfer, relinquishment of rights, and settlement documents, not merely immovable property involvement.
Capital gains consequences depend on the legal nature of the settlement and the documents executed. If the original owner receives apartments in lieu of his land claim and relinquishes rights in the land, the arrangement may amount to a transfer and capital gains may arise, with consideration generally taken as the fair market value of the apartments. Section 78 is not automatic and applies only if the statutory conditions for transfer of land or building for inadequate consideration are satisfied.