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Unit 12: Income under the Head Capital Gains

Less: Cost of Acquisition (COA) 28,00,000 Notes
Cost of Improvement (COI) NIL
Expenditure on transfer NIL
Short Term Capital Gains/Loss (16,00,000)

Task Mr. X purchased a new office building for ` 12,00,000 on 1 June of Previous year.
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The opening block of building as on beginning of the previous year was ` 5,00,000 with
rate of depreciation of 10%. During the year an old building costing ` 7,00,000 was sold for
` 2,00,000. Find out the depreciation chargeable and the amount of capital gain if any.

Special Provisions for Computation of Capital Gains in Case of Slump Sale

Any profits or gains arising from the slump sale, affected in the previous year, shall be chargeable
to income-tax as capital gains arising from the transfer of long-term capital assets and shall be
deemed to be the income of the previous year in which the transfer took place. However, if the
undertaking is owned and held by the assessee for not more than 36 months immediately
preceding the date of transfer, then such slump sale will result into short-term capital gain. On
the other hand, if such undertaking is owned and held by the assessee for more than 36 months
immediately preceding the date of transfer, it shall be deemed to be long-term capital gains
irrespective of the fact that such undertaking has acquired certain assets which are held for less
than 36 months.

Did u know? ‘Slump sale’ means the transfer of one or more undertakings as a result of the
sale for a lump sum consideration without values being assigned to the individual assets
and liabilities in such sales. In other words it is a sale where the assessee transfers one or
more undertaking as a whole including all the assets and liabilities as a going concern.
The consideration is fixed for the whole undertaking and received by the transferor it is
not fixed for each of the asset of the undertaking as a whole by way of such sale.
Thus it may be noted that the undertaking as a whole or the division transferred shall be
a capital asset.
Reference to Valuation Officer

With a view to ascertaining the fair market value of a capital asset, the concerned Assessing
Officer may refer the valuation of the capital asset to a Valuation Officer appointed by the
Income-tax Department in the following cases:

(a) Where the value of the asset as claimed by the assessee is in accordance with the estimate
made by a registered valuer (who works in a private capacity under a licence issued by the
Board and his valuation is not binding on the Assessing Officer), but the Assessing Officer
is of the opinion that the value so claimed is less than its fair market value (upto June 30,
2012) w.e.f 1st July 2012, the Assessing Officer is enabled to make a reference to the
Valuation Officer where in his opinion the value declared by the assessee is at variance
from the fair market value [Section 55A(a)].
(b) Where the Assessing Officer is of the opinion that the fair market value of the asset exceeds
the value of the asset by more than 25,000 or 15 per cent of the value claimed by the
assessee whichever is less [Section 55A(b)(i) read with Rule 111AA].

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