Long term/short Term Capital Gain

[SITARAM AGRAWAL]

Sir,

Do needful in regard following query. I will use it as guide line/Opinion.

1. Firm Purchased Premises in A.Y. 1977-78. Claimed Depreciation. Sold it in A.Y.2009-10
2. Can I divide the said Asset in Land & Building seperately

As decided by the Bombay High Court :

Commr. Of IT Vs. Citi Bank N.A. dt. 23-04-2003

261 ITR 570 , 134 Taxmann 467

3. Can I substitute Value as on 01-04-1981 for Land for consideration of Long Term Capital Gain  and Value as on 01-04-1988 for Building for consideration of Short Term Capital Gain. Being Sec. 50 has given effect

w.e.f. 01-04-1988

4. What is impact on Sec. 50 of the case law :

Commonwealth Trust Limited Versus Commissioner of Income-Tax  (1997 (7) TMI 14 - SUPREME Court)=(1997) 228 ITR 1 (SC)

5.   Any other view or Case Law for above fact.

Thanks

Sitaram Agrawal

[Surender Gupta]

Computation of Capital Gain - sale of land and building - Held that:- Land and building has to be bifurcated for the purpose of computation of capital gain and since depreciation in some years has been allowed in respect of building portion, the capital gain in respect of building portion has to be computed as short term capital gain under section 50. The gain in respect of land portion has to be computed as long term capital gain as per method prescribed in the Act. Since assessee has invested the long term capital gain in NABARD Bonds, assessee would be entitled to deduction under section 54 EC even in respect of short term capital gain computed under section 50 in respect of building portion, if the same was held for more than three years - issue is thus restored to the file of AO.

See this:

2012 (12) TMI 682 - ITAT, MUMBAI

Cadbury India Limited Versus Addl. Commissioner of Income tax, Range-5(1) Mumbai.

 The following case referred in your query is not relevant:

2003 (4) TMI 92 - BOMBAY HIGH COURT

Commissioner of Income-Tax Versus Citibank N. A.

AI Summary

Bifurcation of land and building: building portion treated as short term under section 50; land as long term. Bifurcation into land and building is required where depreciation was claimed: the building portion's gain is to be computed as short term capital gain under section 50, and the land portion's gain as long term capital gain by the statutory method. Investment of long term capital gain in specified bonds can trigger deduction under section 54EC, and that deduction approach may extend to the short term gain on the building portion if the holding period condition is met, with the matter referred to the assessing officer.