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Allocation of Profit in sale of Land and Building - Income TaxExtract We sold our factory land building where the sale deed seperately stated the value of the land and seperately stated the value of the Building. The Sale value was more than the combined values of Land and Building .The values were accepted by the Stamp Valuation Officer and stamp duty was duly paid. The Value of the Land ( circle Rate ) was 1.23 Crore and the building was at O.24 crore in the sale deed. However we sold the property at 2.40 crores and the same was in the sale deed. Thus there was an excess of about 92 lacs over the circle rates. After deducting the indexed cost of land, we paid Long Term capital Gains. The residual value i.e. 2.40 crores less (1.23 + 0.24 ) = 1.16 crores was Credited to the Block of Assets i.e. Buildings.This meant 0.24 lacs value of Building in the sale deed+ 92 lacs excess. Thus no tax was paid on that as the existing Block of Assets ( Buildings ) was more than 1.16 lacs The AO is now stating that the excess over the stamp duty value cannot be all transferred to the Building account but should be divided between Land and Building in the ratio of the circle values as per circle rates. This would mean that we cannot Credit all the residaul value over the land value ( as per circle rates ) to the Block of Assets of the Building but have to add back 79 lacs to the land Values . We would then have to pay LTCG Tax on the Land Value. This is a case where our sale deed is above the Circle rates and yet we are sufferring. Please Comment
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