capital gains practicals

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Capital Gains : Neumericals

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Practical Questions

1. R purchased a hue in Delhi on 16.12-2011 for Rs. 12,00,000. In March, 2013 he entered into an agreement to sell the

property to X for a consideration of Rs. 20,00,000 and received earnest money Rs. 2,00,000. As per terms of the agreement,

the balance payment would be made within 30 days of the agreement. If the intending purchaser does not make the payment

within 30 days, the earnest money would be forfeited. As X could not make the payment within the stipulated time the

amount of Rs. 2,00,00 was forfeited by R. chargeable to tax for the assessment year 2014-15.

2. X purchased a piece of land on 4.1.1978 for Rs. 50,000. This land was sold by him on 2.9.2013 for Rs. 14,00,000. The

market value of the land as on 1.4.1981 was Rs. 1,20,000. Expenses were 2% of the sale price. Compute the capital gain for

the assessment year 2014-15

3. What would be the answer if the land was purchased by X on 1.4.1988 for Rs.1,50,000? CII for the financial year 1988-89 is

161.

4. X acquired the property in the previous year 1982-83 for Rs. 5,00,000 and paid Rs. 18,000 as registration charges. X died on

15.9.2009 and the property was transferred to his son Y through inheritance. The market value of the property as on

15.9.2009 is Rs. 10,00,000. Y sold this property on 31.5.2013 for Rs. 52,00,000. Compute the capital gain for the

assessment year 2014-15. CII for the financial year 1982-83, 2009-10 and 2013-14 is 109,632 and 632 and 939

respectively.

5. (Asset acquired by the assessee from the previous owner before 1.4.1981): X acquired a land in 1977-78 for Rs.2,00,000 and

gifted it to his major son Y on 1.6.1980. when the market value of the land was Rs. 2,50,000. The fair market value of that

land as on 1.4.1981 was Rs. 3,00,000. Y sold the land on 15.9.2013 for Rs. 30,00,000. Compute the capital gain for

assessment year 2014-15, assuming that the expenses on transfer were Rs. 1,00,000.

(b) What would be the capital gain if the land was gifted by X to his son Y on 15.5.1995 ?

6. E purchased a house on 28.6.1990 for Rs. 1,10,000 and paid Rs. 10,000 for getting the property registered in his name. On

15.6.1991, he spent Rs. 80,000 on improvement of the house. The house was sold on 21.10.2013 for Rs. 11,00,000.

Commission of Rs. 11,000 was paid on the sale of the house. Compute the capital gains. CII for the financial year 1990-91

and 1991-92 is 182 and 199 respectively.

7. R. acquired a residential house on 1.9.1978 for Rs. 1,00,000. He spent Rs. 25,000 on 1.7.1980 for the improvement of this

house property. A further amount of Rs. 50,000 was spent by him on 15.11.1985 on improvement of the house. R gifted the

said property to his son B on 12.10.1994. B also spent the following amounts on improvement of the house.

Date of expenditure Amount

Rs.

15.7.1995 60,000

15.6.2013 40,000

B sold the above house on 30.11.2013 for a sum of Rs. 45,00,000. Expenses on transfer were 2% of the sale consideration.

Compute the capital gain for the assessment year 2014-15, assuming the fair market value of the house as on 1.4.1981 to be

Rs. 3,00,000.

8. R owns a house property which was purchased by him on 1.5.1979 for Rs. 3,00,000. The said property was destroyed by fire

on 3.4.2013 and R received a sum of Rs. 38,00,000 for the insurance company during the year. The market value of the

above property as on 1.4.1981 was Rs. 4,00,000. Compute the capital gain for the assessment year 2014-15.

9. The written down value of the block of assets as on 1.4.2013 was Rs. 5,00,000. An asset of the same block was acquired on

11.5.2013 for Rs. 3,00,000. There was a fire on 18.9..2013 and the assets were destroyed by fire and the assessee received a

sum of Rs. 11,00,000 from the insurance company. Compute the capital gain assuming :

(a) All the assets were destroyed by fire

(b) Part of the block was destroyed by fire

(2) What will be the answer if assessee received Rs. 6,00,000 from insurance company and assume (a) all the assets were

destroyed by the fire. (b) Part of the block was destroyed by fire.

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10. X invested Rs. 1,00,000 on the purchase of gold ornaments on 4.1.1989. He holds the gold ornaments as investments. On

12.1.2011 he started a business of dealing in jewellery and converts his holding into his stock-in-trade. The market value of

the gold ornaments as on the date of conversion was Rs. 5,00,000 and therefore, X credited his capital account by

Rs.4,00,000 and debited his stock account by Rs. 4,00,000. The gold ornaments are now reflected in the business of X as

stock-in-trade. These gold ornaments were sold in the previous year 2013-14 for a sum of Rs. 6,00,000.

(a) Compute the capital gain and business income.

(b) What would be the answer if the gold ornaments are held by the assessee till 31.3.2014 ?

11. R acquired a property by way of gift from his father in the previous year 1991-92 when its FMV was Rs. 3,00,000. The

father had acquired the property in the previous year 1983-84 for Rs. 2,00,000. This property was introduced as capital

contribution to a partnership firm in which R became a partner on 5.6.2013. The market value of the asset as on 5.6.2013.

The market value of the asset as on 5.6.2013 was Rs. 20,00,000, but it was recorded in the books of account of the firm at

Rs. 18,00,000. Is there any capital gain chargeable in the hands o R ? yes, compute the amount.

12. A has 2 motor cars which are used by him exclusively for his personal purposes. The cost of the cars was Rs. 1,50,000 and

Rs. 1,80,000. The first car was transferred by him on 5.1.2014 to a firm in which he is a partner as his capital contribution.

The market value of the car as on 5.1.2014 is Rs. 1,00,000, but it was recorded in the books of account of the firm at Rs.

2,00,000. Compute the capital gain if any, chargeable for the assessment year 2014-15.

13. What would be the answer if A had converted the first car into stock-in-trade of his business ?

14. PQR & Company is a partnership firm, consisting of 3 partners P, Q and R. The firm is dissolved on 31.3.2014. The assets

of the firm were distributed to the partners as under:

Particulars Block of

Machinery

(Given to P)

Stock

(Given to Q)

Land

(Given toR)

Year of acquisition 1989-90 2001-02 1977-78

Rs. Rs. Rs.

Cost of acquisition 7,20,000 4,00,000 10,000

Market value as on 31.3.2014 5,00,000 5,00,000 7,00,000

WDV as on 31.3.2014 4,40,000 - -

Value at which given to partners as per agreement 3,00,000 4,10,000 3,00,000

Market value as on 1.4.1981 - - 70,000

Compute the income taxable in the hands of the firm for the assessment year 2014-15. Further what shall be the cost of

acquisition of such assets to the partners of the firm.

15. A firm consists of 3 partners namely R, G and S.S retires from the firm on 15.10.2013. His capital balance and the profits till

the date of retirement stood at Rs. 15,00,000. The firm transferred its land to S in settlement of his account. The market

value of the Land as on that date was Rs 25,00,000. The land was acquired by the firm on 1-5-94 for Rs 5,00,000.

Compute capital gain in the hands of the firm.

16. X acquired a house for Rs. 20,000 in 1977-78. On his death in October 1986 the house was acquired by his son Y. The

market value of the house as on 1.4.1981 was Rs. 80,000. This house was acquired by the Government on 15.3.2011 for Rs.

6,60,000 and a compensation of Rs. 5,20,000 is paid to him on 25.3.2013 and the balance Rs. 1,40,000 on 15.4.2013. Y filed a

suit against the Government challenging the quantum of compensation and the court ordered for giving of additional

compensation of Rs. 1,00,000, He incurred an expenditure of Rs. 2,000 in compensation with the suit. The additional

compensation is received on 14.3.2014. Compute the capital gains chargeable to tax.

17. R acquired 200 listed debentures of Rs. 100 each on 15.5.2006. 50% value of the debentures was converted into 4 listed

equity shares of the face value of Rs. 10 each on 20.8.2012 R therefore, received 800 shares of face value of Rs.10 each and left

with 200 debentures of Rs. 50 each. The shares were sold on 15.6.2013 @ Rs. 100 per share through recognized stock exchange

and R paid Rs. 80 as securities transaction tax. Compute the capital gain chargeable for the assessment year 2014-15.




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18. A holds 5,000 shares (10% of total share holding) in X Ltd. which he had purchased on 5.3.1994 for Rs. 2,0,000. The

company went into liquidation on 16.7.2013 and paid a sum of Rs. 40 per share in cash and an asset whose market value as on the

date of distribution i.e. 28.9.2013 was Rs. 6,40,000 to A. The accumulated profits of the company were Rs. 5,00,000.

(a) Compute the income of A for the assessment year 2014-15 assuming that he has no other income

(b) Compute the capital gain chargeable to tax if the asset X is sold by A for Rs. 7,00,000 on 28.3.2014

19- Mr. Rohit Paul purchased Gold on 1.10.1971 for Rs. 2,00,000 and its fair market value on 01.04.1981 is Rs. 3,00,000 and he

converted it into stock-in-trade on 01.10.1988 and market value of the gold on the date of conversion was Rs. 11,00,000 and

subsequently half of the stock-in-trade was sold on 01.10.2013 for Rs. 6,5,000 and balance half was sold on 01.10.2014 for Rs. 7,50,000. Compute his total income for various years.

20- Ms. Bhanumathi purchased 10,000 equity shares of Vimil Co. Ltd. on 28.02.2005 for Rs. 1,20,000. The company was wound

up on 31.07.2013. The following is the summarized financial position of the company as on 31.07.2013 :

Liability Rs. Assets Rs.

70,000 Equity shares 7,00,000 Agricultural lands 43,00,000

General reserve 40,00,000 Cash at bank 7,00,000

Provision for taxation 3,00,000

50,00,000 50,00,000

The tax liability (towards dividend distribution tax) was ascertained at Rs. 3,50,000, after considering refund due to the

company. The remaining assets were distributed to the shareholders in the proportion of their shareholding. The market value

of 6 acres of agricultural land (in an urban area) as on 31.07.2013 is Rs. 11,00,000 per acre.

The agricultural land received above was sold by Ms. Bhanumathi on 28.02.2014 for Rs. 16,00,000.

Discuss the tax consequences in the hands of the company and Ms. Bhanumathi.

Cost inflation indices are :

Financial year Index number

2004-05 480

2013-14 939

21- Mr. Pankaj Goenka purchased one house on 01.10.1961 for Rs. 2,00,000 and incurred Rs. 1,00,000 on its improvement on

01.10.1971. Its fair market value on 01.04.1981 is Rs. 3,50,000.

Mr. Pamkaj Goenka expired on 01.10.2013 and the house was inherited by his son Mr. Nitesh Nirmal and value for the

purpose of charging stamp duty was Rs. 10,00,000. Mr. Nitesh Nirmal has sold the house on 01.11.2013 for Rs. 35,00,000.

Compute tax liability of Mr. Nitesh Nirmal for the assessment year 2014-15.

Rs.

22- Mr. X purchased one house on 01.10.1992 for Rs. 2,00,000 and incurred Rs. 5,00,000 on its improvement in F.Y. 1999-2000

and Mr. X gifted the house on 01.10.2013 to his friend Mr. Y when its value for the purpose of charging stamp duty was Rs.

10,00,000. Mr. Y sold the house on 01.01.2014 for 42,00,000. Compute his tax liability.

23- Presume Mr. Y is son of Mr. X and house was gifted on 01.11.2011 and value for the purpose of charging stamp duty was Rs.

32,00,000.

24- Mr. A is proprietor of Kamal Enterprises having 2 units started on 01.04.2006. He transferred on 1.04.2013 his unit I by way

of slump sale for a total consideration of Rs. 45 Lacs. The expenses is incurred for this transfer were Rs. 65,000/-. His balance

Sheet as on 31.03.2013 is as under :

Liabilities Total

Rs

Assets Unit 1

Rs

Unit 2

Rs

Total

Rs

Own Capital 21,00,000 Building 15,00,000 4,00,000 19,00,000

Revaluation Reserve

(for building of unit 1)

6,00,000 Machinery 5,00,000 2,00,000 7,00,000

Bank Loan

(70% for unit 1)

4,00,000 Debtors 3,00,000 70,000 3,70,000

Trade creditors 3,10,000 Other assets 3,50,000 90,000 4,40,000




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Total 34,10,000 Total 26,50,000 7,60,000 34,10,000

Other information :

(i) Revaluation reserve is created by revising upward the value of the building of unit 1.

(ii) No individual value of any asset is considered in the transfer deed.

Compute the capital gain the assessment year 2014-15

25- Mr. Dhruv Aggarwal purchased one building on 01.10.1982 for Rs. 5,00,000. He entered into an agreement on 01.10.1987 to

sell this building and advance money of Rs. 25,000 was received but subsequently the buyer backed out and the advance

money was forfeited. This building was sold on 01.01.2014 to some other person for Rs. 45,00,000. Compute total income in

the hands of Mr. Dhruv Aggarwal for the assessment year 2014-15.

26- Mr. Jeevan Chauhan purchased one house on 01.10.1982 for Rs. 3,00,000. He entered into an agreement to sell the house on

01.10.1988 for Rs. 7,00,000 and advance money of Rs. 25,000 was received but the buyer has backed out and the advance

money was forfeited Mr. Jeevan Chuahan has expired on 01.10.1995 and the asset was inherited by his son Mr. Baldev

Chauhan who has further entered into agreement to sell this house on 01.10.1988 and advance money of Rs. 30,000 was

received but the buyer backed out and the advance money was forfeited. Finally the house was sold on 01.01.2014 for Rs.

27,00,000. backed out and the advance money was forfeited. Finally the house sold 01.01.2014 for Rs. 27,00,000.Compute

capital gain and tax liability for assessment year 2014-15.

27- Mr. Parakh Gupta purchased one residential house on 01.04.1982 for Rs. 5,00,000. This house was acquired compulsorily by

the Government on 01.10.2001 and compensation of Rs. 35,00,000 was fixed by the government but the mount was paid by

the Government on 01.03.2014. The assessee has purchased one residential house on 01.01.2014 for Rs. 2,00,000 and the was

sold by him on 01.01.2015 for Rs. 4,00,000. Compute his tax liability for the assessment year 2014-15 and also capital gains

for the various years.




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Solution 19: Rs.

Computation of Capital Gains under section 45 (2)

Full value of consideration 11,00,000

Less: Indexed cost of acquisition

=3,00,000/Index of 81-82 x Index of 88-89

=3,00,000/100x161=Rs. 4,83,000 4,83,000

Long Term Capital Gain 6,17,000

Assessment year 2014-15

Long Term Capital Gain (1/2 of Rs. 6,17,000) 3,08,500

Solution 20 :

The company has distributed assets to its shareholders at the time of liquidation is not regarded as a transfer under section

46(1).

Computation of capital gains of Ms. Bhanumathi Rs.

Capital gain on transfer of shares

Net distributable amount

(Rs. 7,00,000+66,00,000-3,50,000) 69,50,000.00

Proportionate amount of bhanumathi 1/7th x 69,50,000 9,92,857.14

Accumulated profits 40,00,000-(3,50,000-3,00,000) 39,50,000.00

Proportionate share of Bhanumathi 1/7th x 39,50,000 5,64,285.71

Hence deemed dividend under section 2 (22) (c) shall be 5,64,285.71

However dividends shall be exempt from income tax under section 10(34) 4,28,571.43

Full value of consideration (9,92,857.14-5,64,285.71)

Less : Indexed cost of acquisition

=1,20,000/Index of 04-05xIndex of 13-14 2,34,750.00

=1,20,000/480x939=2,34,750 1,93,821.43

Long term capital gain

Capital gain on transfer of agricultural land 16,00,000.00

Full value of consideration 9,42,857.14

Less: Cost of acquisition (market value) 6,57,142.86

Solution 21-

Computation of Capital Gains 35,00,000.00

Full value of consideration

Less: Indexed cost of acquisition 32,86,500.00

=3,50,000/100x939=Rs. 32,86,500 02,13,500.00

Long Term Capital Gain 02,13,500.00

Income under the head Capital Gain 02,13,500.00

Gross Total Income Nil

Less : Deduction u/s 80C to 80U 2,13,500.00

Computation of Tax Liability

{Since normal income is nil. as per section 112 deficiency of Rs. 2,00,000 shall be allowed from long term capital gain and

balance income shall be taxed at flat rate of 20%]

Tax on Rs. 13,500 (Rs. 2,13,500-Rs. 2,00,000) @ 20% 2,700.00

Less : Rebate u/s 87A (2,700 or 2,000 whichever is less) 2,000.00

Tax before education cess 0700.00

Add: Education cess @ 2% 0014.00

Add : SHEC @ 1% 721.00

Tax Liability 720.00

Solution 22 : Rs.

Income under the head Other Sources 10,00,000.00

Computation of Capital Gains 42,00,000.00




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Less : Cost of acquisition 32,00,000.00

Short Term Capital Gain


Gross Total Income 42,00,000.00

Less : Deduction u/s 80C to 80U Nil

Total Income 42,00,000.00


Tax on Rs. 42,00,000 at slab rate 10,90,000.00

Add: Education cess @ 2% 0021,800.00

Add: SHEC @ 1% 0010,900.00

Tax Liability 11,22,700.00

Solution 23: Rs.

Computation of Capital Gains



=2,00,000/223x939=Rs. 8,42,152.47 8,42,152.47

Less: Indexed cost of improvement

=5,00,000/389x939=Rs. 12,06,940.87 12,06,940.87




Less: Deduction u/s 80C to 88U Nil

Total Income (Rounded off u/s 288A) 21,50,910.00


{Since normal income is nil, as per section 112 deficiency of Rs. 2,00,000 shall be allowed from long term capital gain and

balance income shall be taxed at flat rate of 20%}

Tax on Rs. 19,50,910 (Rs. 21,50,910-Rs.2,00,000) @ 20% 3,90,182.00



Add: SHEC@1% 4,01,887.46


Solution 24:

Computation of capital gains on slump sale of Unit

Particulars Rs.

Sale value 45,00,000

Less: Expenses on sale 65,000

Less: Net worth (See Note (i) below) 16,92,500

Long term capital gain 27,42,500

Note (i) : Computation of net worth of Unit 1 of Kamal Enterprise

Particulars Rs.

Building (excluding Rs. 6 lakhs on account of revaluation) 9,00,000

Machinery 5,00,000

Debtors 3,00,000

Other assets 3,50,000

Total Assets 20,50,000

Less:

Bank Loan (2,80,000)




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Creditors (77,500)

Net worth 16,92,500

Solution 25 : Rs.

Computation of Capital Gains



=Cost of acquisition as per section 51 (Rs. 5,00,000-Rs. 25,000)

=4,75,000/Index of 82-83 x Index of 13-14 40,91,972.48

=4,75,000/109x939=Rs. 40,91,972.48 04,08,027.52


Gross Total Income Nil

Less: Deduction u/s 82C to 8U 04,08,030.00

Solution 26 : Rs.



=Rs. 2,7,000 (3,00,000-30,000)/Index of 82-83 x Inded of 13-14

=Rs. 2,70,000/109x939=Rs. 23,25,963.30 23,25,963.30


Income under the head Capital Gains 03,74,036.70



Total Income (rounded off u/s 288A) 03,74,040.00

Computation of tax liability

Tax on long term capital gain Rs. 1,74,040 (3,74,040-2,00,000)@ 20% u/s 111 34,808.00

Less : Rebate u/s 87A (34,808 or 2,000 whichever is less) 02,000.00

Tax before education cess 32,808.00

Add: Education cess@ 2% 00656.16

Add: SHEC@ 1% 00328.08

Tax Liability 33,792.24

Solution 27 : Rs.

Computation of capital gains under section 45 (5)

Capital gain shall be computed in the year in which the asset was acquired i.e. in the previous year 2001-02 and shall be taxed

in the year in which the first payment has been received i.e. in the previous year 2013-14



=5,00,000/109x426= Rs. 19,54,128.44 19,54,128.44

Long Term Capital Gains 15,45,871.56

Less : Exemption u/s 54 2,00,000.00

Long Term Capital Gains 13,45,871.56

Income under the head Capital Gain (LTCG) 13,45,871.56



Total Income (rounded off u/s 288A) 13,45,870.00


{Since normal income is nil, as per section 112 deficiency of Rs. 2,00,000 shall be allowed from long term capital gain and

balance income shall be taxed at flat rate of 20%}

Tax on Rs. 11,45,870 (Rs. 13,45,870-Rs. 2,00,000) @ 20% 2,29,174.00

Add : Education cess @ 2% 004,583.48

Add: SHEC@ 1% 002,291.74





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Rounded off u/s 288B 2,36,050.00

Computation of Capital Gain for the assessment year 2015-16

Capital gain on sale of House


Less: Cost of acquisition (Rs. 2,00,000-Rs. 2,00,000) Nil

Short Term Capital Gain 4,00,000.00

Hence Short Term Capital Gain for assessment year 2015-16 4,00,000.00


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