CAPITAL GAIN ON SALE OF OFFICE PROPERTY.

[GOPAL KHETAN]

I have a office property/commercial premises, on which I used to conduct my propreitorship business.For the past 5 years,I have joined another co. as a director, and have rented out this office premise,and  showing the income as income from House property.

My question,is that I have received a good offer for this property for outright sale, in the event,I sell this property,and invest the proceeds in another commercial premises, which would again be rented, would this attract capital gains tax.

Please advise.

[CA Rachit Agarwal]

As per the property was used for the office purpose and hence the same was under fixed assets. The sale of such property would lead to short term capital gains as the same was classified as depreciable assets.If depreciation is continued from the date of letting of the office on rent, then the sale of property would classifed under Short Term Capital Gain.

However if the depreciation is not claimed, and same has been classfied under Investment property. The date of conversion is to be checked from depreicable property to investment property and accordingly classification of short term/long term could be classifed.

Tax planning to be done accordingly.

AI Summary

Capital gains classification on sale of commercial premises depends on depreciable-asset status and depreciation claim. Capital gains treatment on sale depends on whether the office was a proprietor's fixed (depreciable) asset with depreciation claimed-leading to short term capital gains-or whether depreciation was not claimed and the property was reclassified as an investment property, in which case the date of conversion determines short term or long term classification.