Special Economic Zone - Taxation Taxation Notes | EduRev

Income Tax for assessment year 2017-18 (Inter Level)

Taxation : Special Economic Zone - Taxation Taxation Notes | EduRev

The document Special Economic Zone - Taxation Taxation Notes | EduRev is a part of the Taxation Course Income Tax for assessment year 2017-18 (Inter Level).
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Special Economic Zone - Taxation

Conditions

(a) All assessees whether individual, HUF, Company etc. can claim exemption u/s 54GA.

(b) Which asset should be transferred : The asset which is transferred should be a Plant, machinery, Land or Building or any right in land or building used for the purpose of industrial undertaking situated in urban area. Such asset can be either LTCA  / STCA  / Depreciable asset.

(c) When such new assets should be purchased or constructed : Such new assets should be purchased or constructed within time allowed i.e. 1  year before or 3 year after the “Zero Date”.  Zero Date is the date of sale of original assets.

e.g. Suppose zero date is 7-8-2016. New assets should be purchased by 8-8-2015 and by 6-8-2019 (1 year <--------Zero date --->3 years). 

Other Points

(i) purchased machinery or plant for the purpose of business of the industrial undertaking in the SEZ to which the said undertaking is shifted.

(ii) acquired building or land or constructed building for the purposes of his business in the SEZ.

(iii) shifted the original asset and transferred the establishment to SEZ. (Shifting expenses)

(iv) incurred expenses on such other purpose as may be specified in a scheme framed by the Central Govt. for the purpose of this section.

(d) Deposit scheme u/s Section 54(2) is applicable.

Amount of Exemption 

Amount invested in such new asset within zero date +

AE

Amount deposited in Scheduled Bank on or before the due date of furnishing of return

TE

Total exempted amount limited to LTCG [AE+TE limited to LTCG]

xx

 
Consequences 1: Consequences of non- utilisation of deposited amount within 3 years from the zero date

 

Amount of capital gain exempted earlier out of deposited amount

TE

Less: Amount invested in new assets within 3 years from the zero date

AE

LTCG / STCG1 (Chargeable in the PY when period of 3 years expires from the zero date)

xx

 

Note : 1 Depends upon original capital asset transferred.
Note: The remaining unutilised amount can bewithdrawnat any time after the expiry of 3 years from the zero date.

 

Consequences 2: Consequences if new asset is transferred within 3 years from the date of acquisition of new asset

  

The amount of capital gain exempted earlier +

LTCG

+ The amount of capital gain arising on transfer of such new asset

STCG

STCG (chargeable to tax in the year of transfer) (YOC = YOT)

STCG

 

P1: X Ltd., located within the corporation limits, decided to shift its industrial undertaking to special economic zone. The company sold some of the assets and acquired new assets in the process of shifting. The relevant details are as follows :

 

Land

Building

Plant & Machinery

Furniture

Sale proceeds (sales effected in March 2017)

8

18

16

3

 

Indexed cost of acquisition

4

NA

NA

NA

Opening WDV as on 1-4-20

-

4

5

2

Cost of new assets purchased in July 2017 for the purpose of industry located in SEZ

4

7

17

2

 

Compute the capital gains of X Ltd. for the assessment year 2017-18. Ans: STCG 1,00,000; LTCG 1,00,000.

Solution

 

Land

Building

Plant & Machinery

Furniture

Sale proceeds (sales effected in March 2017)

8

18

16

3

Indexed cost of acquisition

4

NA

NA

NA

Opening WDV as on 1-4-20

-

4

5

2

LTCG

4

-

-

-

STCG

-

14

11

1

Less : 54GA. Rs 28 L

3

14

11

-

LTCG

1

-

-

-

STCG

-

-

-

1

 
 
P2 : Mrs. X shifted her industrial undertaking located in corporation limits of Faridabad, to a Special Economic Zone (SEZ) on December 1, 2016. The following particulars are available -
 

Land : Purchased on January 20, 2011

4,26,000

Sold for

22,00,000

Building [construction completed on March 14, 2014]

WDV of building as on April 1, 2016

8,20,000

Sold for

11,39,000

Cars WDV as on April 1, 2016

7,40,000

Sold for

6,00,000

Expenses on shifting the undertaking

1,15,000

Assets acquired for the undertaking in the SEZ (on or before June 25, 2017)

 

Land

3,00,000

Building

5,00,000

Computers

1,00,000

Car

4,20,000

Machinery (second hand)

2,00,000

Furniture

50,000

 

There is no intention of investing in any other asset in this undertaking. Compute capital gain.

Ans: 69,994

Assignment

P1R: X owns a residential house which is self-occupied and also a house plot. He sells the house on January 31, 2017 and the house plot on February 15, 2017 for Rs 9,00,000 and Rs 5,00,000, respectively. The house was purchased on January 15, 2008 for Rs 4,00,000 and the plot on March 31, 2008 for Rs 2,00,000. X has purchased a new residential house on April 25, 2016 for Rs 5,00,000. Compute the income chargeable under the head “capital gains” for the AY 2017-18.

Ans: 15,270.

P2: Mr. ‘X’ furnishes the following data for the previous year ending 31-3-2017 :

(a) Preference shares of AB Ltd., 10,000 in number were sold on 31-3-2017, at Rs 500, for cash share.

(b) The above shares of 10,000, were acquired by ‘X’ in the following manner:

(i) Received as gift from his father on June 1, 1980, the market price on April 1, 1981 Rs 40 per share. (5,000 sha res)

(ii) Bonus shares received from AB Ltd. on 21-7-1995 (2,000 shares).

(iii) Purchased on 1-2-2002 at the price of Rs 125 per share (3,000 shares).

(c) Purchased one residential house at Rs 30,00,000, on 1-9-2017 from the sale proceeds of shares.

(d) ‘X’ is already owning a residential house, even before the purchase of above house.

You are required to compute the taxable capital gain.

Ans: 2,00,000
 
P3: On 1-8-1976 Mr. Man Mohan purchased 400 shares of XYZ Co. Ltd. @ Rs 95 per shares. On 31-12-1980 the XYZ Co. Ltd issued bonus shares. Mr. Man Mohan was allotted 600 bonus shares. The fair market Value of the shares on 1-4-1981 was Rs 90 per shares. On 3-9-2016 Mr. Man Mohan sold all the 1,000 shares @ Rs 1,150 per shares and paid brokerage etc. @ 2% on sale consideration. Out of the sale consideration he invested Rs 7,00,000 in the construction of a residential house which was completed before 30-6-2017.
 
Compute the taxable amount of capital gain of Mr. Man mohan for the assessment year 2017-18 assuming that he does not own any other residential house. The shares are sold outside a recognised stock exchange.
Ans: 22,070.
 
P4: Mr. X sells following assets. Compute his capital gain for the AY 2017-18.
 

Particulars

Date of acquisition

Cost of acquisition

Date of sale

Sale consideration

RHP 1

2015-16

1,00,000

2016-17

1,25,000

Urban AL

2015-16

80,000

2016-17

70,000

RHP 2

2008-09

A 4,00,000

1-6-20

8,90,000

Gold

2003-04

6,00,000

1-3-20

10,00,000

Diamond

2011-12

1,50,000

20-8-20

4,90,000

Govt. securities

2013-14

2,50,000

25-9-2016

3,70,000

 
He purchases following assets to claim exemptions
 

 

Date of purchase

Amount

Equity shares of National Highway Authority of India

26-3-2017

90,000

Bonds of Rural Electrification Corporation Ltd.

19-8-20

25,000

Debentures of National Highway Authority of India

12-12-20

3,20,000

Equity shares of LG (P) Ltd

14-12-20

20,000

Agricultural land in rural area

31-7-20

25,000

 

Ans: LTCG (3,40,568); STCG 15,000

P5: Mr. A who transfers land and building on 2-1-2017, furnishes the following information :

(i) Net consideration received Rs 10 lakhs.

(ii) Value adopted by stamp valuation authority, which was not contested by Mr. A Rs 17 lakhs.

(iii) Value ascertained by Valuation officer on reference by the Assessing Officer Rs 17 lakhs.

(iv) This land was distributed to Mr. A on the partial partition of his HUF on 1-4-1981. Fair market value of the land as on 1-4-1981 was Rs 1,10,000. (v) A residential building was constructed on the above land by Mr. A at a cost of Rs 3,20,000 (construction completed on 1-12-2013 during the Financial year 2013-14.

(vi) Short-term capital loss incurred on sale of shares during the Financial year 2013-14 Rs 2,05,000.
Compute amount of gain and also Mr. A seeks your advice as to the amount to be invested in NHAI bonds so as to be exempt from clutches of capital gain tax.

Ans: 79,113; 79,113 should be invested; 2,05,000 shall be carried forward to next year. The assessee can invest in NHAI within 6 months of the date of transfer i.e. by 1-7-2017. It may be noted that in case the assessee is a resident and does not have any other income, then no investment in bonds is required as income is upto the basic exemption.

P6: Mr. C inherited from his father 8 plots of land in 1980. His father had purchased the plots in 1960 for Rs 5 lakhs. The fair market value of the plots as on 1-4-1981 was Rs 8 lakhs. (Rs 1 lakh for each plot)

On 1st June 2006, C started a business of dealer in plots and converted the 8 plots as stock-in-trade of his business. He recorded the plots in his books at Rs 45 lakhs being the fair market value on that date. In June 2011, C sold the 8 plots for Rs 50 lakhs.

In the same year, he acquired a residential house property for Rs 45 lakhs. He invested an amount of Rs 5 lakhs in construction of one more floor in his house in June 2011. The house was sold by him in June 2016 for Rs 63,50,000.

The valuation adopted by the registration authorities for charge of stamp duty was Rs 95,50,000. As per the assessee’s request, the Assessing Officer made a reference to a Valuation Officer. The value determined by the Valuation Officer was Rs 97,20,000. Brokerage of 1% of sale consideration was paid by C.

Ans: PY 11-12 : LTCG 3,48,000; BI 5,00,000. PY 16-17 : LTCG 23,20,895

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