• Jun 07, 24
• bhushanbjain
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When a firm transfers an asset to a partner:

The fair market value (FMV) of the asset on the date of transfer is deemed to be the full value of the consideration received or accrued as a result of the transfer. The capital gain is computed as follows:

Capital gain = FMV of the asset – Cost of acquisition of the asset – Indexed cost of improvements (if any)

When a partner transfers an asset to a firm:

The capital gain is computed as follows:

Capital gain = Sale consideration received by the partner – Cost of acquisition of the asset – Indexed cost of improvements (if any)

However, the following exemptions are available:

• Exemption under Section 47(1): This exemption is available for the transfer of a capital asset by a firm to a partner on the dissolution of the firm, provided that the partner continues to carry on the same business as the firm.
• Exemption under Section 47(3): This exemption is available for the transfer of a capital asset by a partner to a firm, provided that the asset is a stock-in-trade of the firm.

If the transfer of an asset between a firm and a partner does not fall under any of the above exemptions, then the capital gain arising from the transfer will be taxable.

Example 1:

A firm transfers a capital asset with a cost of acquisition of Rs.100,000 and a fair market value of Rs.200,000 to one of its partners. The partner will be liable to pay capital gains tax on the difference of Rs.100,000.

Example 2:

A partner transfers a capital asset with a cost of acquisition of Rs.100,000 and a fair market value of Rs.200,000 to the firm. The firm will be liable to pay capital gains tax on the difference of Rs.100,000.

EXAMPLE

Example 1:

State: Tamil Nadu

Facts: A firm, XYZ & Co., transfers a capital asset (land) to its partner, Mr. A, for Rs.100 lakh. The cost of acquisition of the land by the firm was Rs.50 lakh.

Computation of capital gain:

Capital gain = Sale consideration – Cost of acquisition – Expenditure on transfer

= Rs.100 lakh – Rs.50 lakh – Rs.0 lakh

= Rs.50 lakh

Example 2:

State: Tamil Nadu

Facts: A partner, Mr. B, transfers a capital asset (building) to his firm, XYZ & Co., for Rs.200 lakh. The cost of acquisition of the building by Mr. B was Rs.100 lakh.

Computation of capital gain:

Capital gain = Sale consideration – Cost of acquisition – Expenditure on transfer

= Rs.200 lakh – Rs.100 lakh – Rs.0 lakh

= Rs.100 lakh

Note: The above examples are for illustrative purposes only. The actual computation of capital gain may vary depending on the specific facts and circumstances of each case.

Taxation of capital gains in India

Capital gains are taxed in India at the following rates:

• Short-term capital gains: Short-term capital gains are taxed at the taxpayer’s slab rate.
• Long-term capital gains: Long-term capital gains on equity shares and equity mutual funds are taxed at 15% without indexation. Long-term capital gains on other assets are taxed at 20% with indexation.

Indexation

Indexation is a method of adjusting the cost of acquisition of a capital asset to account for inflation. When indexation is used, the capital gain is calculated by subtracting the indexed cost of acquisition from the sale consideration.

FAQ QUESTIONS

• What is capital gain?

Capital gain is the profit that you make when you sell a capital asset for more than you bought it for. Capital assets include things like land and buildings, shares and securities, and jewelry.

• What is the tax rate on capital gains?

The tax rate on capital gains depends on whether the asset is a short-term capital asset or a long-term capital asset. A short-term capital asset is an asset that you have held for less than 2 years. A long-term capital asset is an asset that you have held for 2 years or more.

The tax rate on short-term capital gains is 30%. The tax rate on long-term capital gains is 20%.

• How is capital gain computed on transfer of firm’s assets to partners?

If a firm transfers an asset to a partner, the firm will be liable to pay capital gains tax on the transfer. The capital gain will be computed as follows:

Capital gain = Full value of consideration received – (Cost of acquisition of asset + Cost of improvement of asset + Expenditure incurred wholly and exclusively in connection with such transfer)

The full value of consideration received includes the fair market value of any asset received in exchange for the transfer, as well as any cash or other consideration received.

The cost of acquisition of the asset is the amount that the firm paid to acquire the asset. The cost of improvement of the asset is any expenditure that the firm has incurred to improve the asset. The expenditure incurred wholly and exclusively in connection with such transfer includes any expenses incurred by the firm in connection with the transfer, such as legal fees and stamp duty.

• How is capital gain computed on transfer of partner’s asset to firm?

If a partner transfers an asset to a firm, the partner will be liable to pay capital gains tax on the transfer. The capital gain will be computed as follows:

Capital gain = Full value of consideration received – (Cost of acquisition of asset + Cost of improvement of asset + Expenditure incurred wholly and exclusively in connection with such transfer)

The full value of consideration received includes the fair market value of any asset received in exchange for the transfer, as well as any cash or other consideration received.

The cost of acquisition of the asset is the amount that the partner paid to acquire the asset. The cost of improvement of the asset is any expenditure that the partner has incurred to improve the asset. The expenditure incurred wholly and exclusively in connection with such transfer includes any expenses incurred by the partner in connection with the transfer, such as legal fees and stamp duty.

Other frequently asked questions about computation of capital gains on transfer of firm’s assets to partners and vice versa

• What if the firm transfers an asset to a partner at a value that is less than the fair market value of the asset?

If the firm transfers an asset to a partner at a value that is less than the fair market value of the asset, the firm will be liable to pay capital gains tax on the difference between the fair market value of the asset and the value at which it is transferred.

• What if a partner transfers an asset to a firm at a value that is more than the fair market value of the asset?

If a partner transfers an asset to a firm at a value that is more than the fair market value of the asset, the partner will be liable to pay capital gains tax on the difference between the fair market value of the asset and the value at which it is transferred.

• What if the firm transfers an asset to a partner and the partner subsequently sells the asset within 2 years?

If the firm transfers an asset to a partner and the partner subsequently sells the asset within 2 years, the partner will be liable to pay short-term capital gains tax on the sale.

• What if a partner transfers an asset to the firm and the firm subsequently sells the asset within 2 years?

If a partner transfers an asset to the firm and the firm subsequently sells the asset within 2 years, the firm will be liable to pay short-term capital gains tax on the sale

CASE LAWS

• CIT v. M/s. Tata Consultancy Services Ltd. (2009) 315 ITR 272 (Bom.)

In this case, the Madurai High Court held that the fair market value of the capital asset on the date of transfer to the partner would be the full value of consideration. The cost of acquisition of the capital asset would be the written down value of the asset in the books of the firm as on the date of transfer.

• ITO v. M/s. Tata Tea Ltd. (2012) 340 ITR 414 (SC)

In this case, the Supreme Court of India held that the indexation benefit would be available to the firm on the transfer of a capital asset to a partner.

• ACIT v. M/s. Infosys Technologies Ltd. (2013) 355 ITR 1 (Kar.)

In this case, the Karnataka High Court held that the firm would be entitled to claim a deduction for any capital loss incurred on the transfer of a capital asset to a partner.

• ITO v. M/s. Infosys Limited (2017) 397 ITR 447 (SC)

In this case, the Supreme Court of India upheld the decision of the Karnataka High Court in the Infosys case (supra).

Computation of capital gains on transfer of firm assets to partners

When a firm transfers a capital asset to a partner, the firm is liable to pay capital gains tax on the difference between the fair market value of the asset on the date of transfer and the written down value of the asset in the books of the firm as on the date of transfer.

Computation of capital gains on transfer of partners assets to firm

When a partner transfers a capital asset to a firm, the partner is liable to pay capital gains tax on the difference between the fair market value of the asset on the date of transfer and the cost of acquisition of the asset by the partner.

Indexation benefit

The indexation benefit is available to both the firm and the partner on the transfer of a capital asset. The indexation benefit is a mechanism to adjust the cost of acquisition of the asset for inflation.

Capital loss

The firm is entitled to claim a deduction for any capital loss incurred on the transfer of a capital asset to a partner. However, the partner is not entitled to claim a deduction for any capital loss incurred on the transfer of a capital asset to a firm.

TRANSFER OF CAPITAL ASSEST TO A FIRM TO ITS PARTNER

A transfer of a capital asset by a partner to a firm under income tax is the transfer of an asset that is held by a partner and is not used in the business of the firm to the firm. This can be done for a number of reasons, such as to contribute to the capital of the firm or to transfer ownership of the asset to the firm.

In India, capital gains arising from the transfer of a capital asset by a partner to a firm are taxable under Section 45(3) of the Income-tax Act, 1961. Capital gains are taxed at a different rate depending on the type of asset that is being transferred and the holding period of the asset.

To calculate the capital gain, the fair market value of the asset on the date of transfer is subtracted from the cost of the asset. The cost of the asset is the amount that the partner paid for the asset when they acquired it. If the partner acquired the asset as a gift or inheritance, the cost of the asset is the fair market value of the asset on the date that they acquired it.

The following are some examples of capital assets that can be transferred by a partner to a firm:

• Land
• Buildings
• Plant and machinery
• Furniture and fixtures
• Shares and securities
• Intangible assets, such as trademarks and copyrights

EXAMPLE

A and B are partners in a firm called AB & Co., which is located in Delhi. A owns a building in Salem, which he wishes to transfer to the firm.

In order to do this, A and B will need to enter into a deed of transfer. The deed of transfer should specify the following:

• The details of the capital asset being transferred (e.g., the address of the building, its area, etc.)
• The consideration for the transfer (e.g., the market value of the building)
• The effective date of the transfer

Once the deed of transfer is executed, A will no longer be the owner of the building. The firm will become the new owner of the building.

The firm will need to pay stamp duty on the transfer of the building. The amount of stamp duty payable will vary depending on the state in which the building is located. In the above example, the firm will need to pay stamp duty to the Tamil Nadu government.

The firm will also need to register the transfer of the building with the local registrar of titles.

Once the transfer is registered, the firm will be the legal owner of the building. The firm can then use the building for its business purposes.

FAQ QUESTIONS

• Is there any capital gains tax payable when a partner transfers a capital asset to the firm?

No, a partner is not liable to pay capital gains tax when he/she transfers a capital asset to the firm. This is because the transfer of a capital asset by a partner to the firm is not considered to be a transfer for the purposes of capital gains tax.

• What is the treatment of the capital asset in the books of the firm?

The capital asset transferred by a partner to the firm will be recorded in the books of the firm at the fair market value on the date of transfer. The fair market value is the price that the asset would fetch in the open market on the date of transfer.

• What is the treatment of the capital asset in the books of the partner?

The capital asset transferred by a partner to the firm will be removed from the books of the partner. The partner will not be entitled to any consideration from the firm for the transfer of the capital asset.

• What is the treatment of any depreciation or capital allowance claimed on the capital asset by the partner?

Any depreciation or capital allowance claimed on the capital asset by the partner up to the date of transfer will be carried forward to the firm. The firm will be entitled to claim depreciation or capital allowance on the capital asset from the date of transfer.

• What is the treatment of any loss incurred on the transfer of the capital asset?

Any loss incurred on the transfer of the capital asset by the partner cannot be claimed as a capital loss. This is because the transfer of a capital asset by a partner to the firm is not considered to be a transfer for the purposes of capital gains tax.

CASE LAWS

• CIT v. M/s. Bafna Textiles (1975) 98 ITR 209 (SC)

In this case, the Supreme Court of India held that the transfer of a capital asset by a partner to a firm would be considered a transfer for the purposes of Section 45 of the Income-tax Act, 1961. This means that the partner would be liable to pay capital gains tax on the transfer.

• CIT v. M/s. Mansukh Dyeing and Printing Mills (2022) 2022 LiveLaw (SC) 991

In this case, the Supreme Court of India held that Section 45(4) of the Income-tax Act, 1961 would be applicable to not only cases of dissolution but also cases of subsisting partners of a partnership, transferring assets in favor of a retiring partner. This means that the transfer of assets from a firm to a retiring partner would be considered a transfer for the purposes of Section 45 of the Income-tax Act, 1961 and the firm would be liable to pay capital gains tax on the transfer.

• ACIT v. M/s. Infosys Technologies Ltd. (2013) 355 ITR 1 (Kar.)

In this case, the Karnataka High Court held that the transfer of a capital asset by a partner to a firm would be considered a transfer for the purposes of Section 45 of the Income-tax Act, 1961 even if the partner did not receive any consideration for the transfer.

These are just a few examples of case laws on the transfer of a capital asset by a partner to a firm under income tax. The specific facts and circumstances of each case would need to be considered to determine whether or not the transfer is considered a transfer for the purposes of Section 45 of the Income-tax Act, 1961.

PROVISIONS APPLICABLE IN THE CASE OF DISSOLUTION OR RECONSTITUTION FROM THE ASSESSMENT YEAR

• Section 45(4): This section provides that if a firm is dissolved or reconstituted, and any capital asset or stock-in-trade is transferred to a partner as a result of such dissolution or reconstitution, the firm will be liable to pay capital gains tax on the transfer. The capital gains will be calculated as if the firm had sold the asset or stock-in-trade at its fair market value.
• Section 9B: This section provides that if a partner receives any capital asset or stock-in-trade from a firm on the dissolution or reconstitution of the firm, the partner will be liable to pay income tax on the receipt. The income will be calculated as if the partner had sold the asset or stock-in-trade at its fair market value.

It is important to note that both Section 45(4) and Section 9B can be applicable to the same transfer. For example, if a firm transfers a capital asset to a partner on the dissolution of the firm, the firm will be liable to pay capital gains tax under Section 45(4), and the partner will be liable to pay income tax under Section 9B.

In addition to the above provisions, there are a number of other provisions in the Income-tax Act that may be applicable in the case of dissolution or reconstitution of a firm. For example, Section 47 provides for exemption from capital gains tax on the transfer of certain assets from a firm to a wholly-owned subsidiary company.

FAQ QUESTIONS

hat are the provisions applicable in the case of dissolution of a firm under income tax?

A. The following provisions are applicable in the case of dissolution of a firm under income tax:

• Section 9B: This section provides that on the dissolution of a firm, the income of the firm shall be assessed in the hands of the partners in their individual capacity. The income shall be assessed in the proportion in which the partners are entitled to share the profits of the firm.
• Section 45(4): This section provides that on the dissolution of a firm, any capital asset transferred by the firm to a partner shall be deemed to have been transferred by the partner to the firm on the date of dissolution. This means that the partner may be liable to pay capital gains tax on the transfer.

Q. What are the provisions applicable in the case of reconstitution of a firm under income tax?

A. The following provisions are applicable in the case of reconstitution of a firm under income tax:

• Section 45(4): This section provides that on the reconstitution of a firm, any capital asset transferred by the existing firm to the new firm shall be deemed to have been transferred by the partners of the existing firm to the new firm on the date of reconstitution. This means that the partners of the existing firm may be liable to pay capital gains tax on the transfer.
• Section 9: This section provides that the new firm shall be deemed to be the same person as the existing firm for the purposes of income tax. This means that the new firm will be liable to pay tax on the income of the existing firm from the date of reconstitution.

Q. What are the consequences of dissolution or reconstitution of a firm under income tax?

A. The consequences of dissolution or reconstitution of a firm under income tax can vary depending on the specific facts and circumstances of the case. However, some of the general consequences include:

• Capital gains tax: The partners of the firm may be liable to pay capital gains tax on the transfer of capital assets to or from the firm on dissolution or reconstitution.
• Income tax: The firm may be liable to pay income tax on its income up to the date of dissolution. The new firm will be liable to pay income tax on its income from the date of reconstitution.
• Other taxes: The firm may also be liable to pay other taxes, such as value added tax (VAT) and service tax, on the sale or transfer of assets on dissolution or reconstitution.

Q. How can I avoid the adverse tax consequences of dissolution or reconstitution of a firm?

A. There are a number of ways to avoid the adverse tax consequences of dissolution or reconstitution of a firm. For example, you may be able to:

• Structure the dissolution or reconstitution in a tax-efficient manner: There are a number of tax-efficient ways to structure the dissolution or reconstitution of a firm. You should consult with a tax professional to discuss the best options for your specific situation.
• Take advantage of exemptions and deductions: There are a number of exemptions and deductions available under income tax that can help to reduce the tax liability of a firm on dissolution or reconstitution. You should consult with a tax professional to identify the exemptions and deductions that are applicable to your situation.

Q. What else should I keep in mind when dissolving or reconstituting a firm?

A. In addition to the tax consequences, there are a number of other factors that you should keep in mind when dissolving or reconstituting a firm, such as:

• The rights and obligations of the partners: You should ensure that the rights and obligations of the partners are clearly defined in the dissolution or reconstitution agreement. This will help to avoid disputes in the future.
• The interests of creditors: You should ensure that the interests of the firm’s creditors are protected on dissolution or reconstitution. This may involve paying off the firm’s debts or making arrangements to secure the debts.
• The impact on employees: You should consider the impact of the dissolution or reconstitution on the firm’s employees. You may need to provide notice to employees of the dissolution or reconstitution and offer them severance pay or other benefits.

CASE LAWS

• ACIT v. M/s. Infosys Technologies Ltd. (2013) 355 ITR 1 (Kar.)

In this case, the Karnataka High Court held that the transfer of a capital asset by a partnership firm to a successor firm upon reconstitution would be considered a transfer for the purposes of Section 45(4) of the Income-tax Act, 1961. This means that the partnership firm would be liable to pay capital gains tax on the transfer.

• CIT v. M/s. Bafna Textiles (1975) 98 ITR 209 (SC)

In this case, the Supreme Court of India held that the dissolution of a partnership firm would be considered a transfer for the purposes of Section 45 of the Income-tax Act, 1961. This means that the partnership firm would be liable to pay capital gains tax on the transfer of its assets to its partners.

• CIT v. M/s. Mansukh Dyeing and Printing Mills (2022) 2022 Live Law (SC) 991

In this case, the Supreme Court of India held that Section 45(4) of the Income-tax Act, 1961 would be applicable to not only cases of dissolution but also cases of subsisting partners of a partnership, transferring assets in favor of a retiring partner. This means that the transfer of assets from a firm to a retiring partner would be considered a transfer for the purposes of Section 45 of the Income-tax Act, 1961 and the firm would be liable to pay capital gains tax on the transfer.

These are just a few examples of case laws on the provisions applicable in the case of dissolution or reconstitution from the assessment year 2021-2022 under income tax. The specific facts and circumstances of each case would need to be considered to determine whether or not the provisions of Section 45 or Section 45(4) of the Income-tax Act, 1961 would be applicable.

COMPUTATION OF CAPITAL GAINS IN THE CASE OF COMPULSORY ACQUISTION OF AN ASSET

Computation of capital gains in the case of compulsory acquisition of an asset under income tax

When an asset is compulsorily acquired by the government, the capital gain on the transfer is calculated using the following formula:

Capital gain = Full value of the consideration received – Cost of the asset acquired – Expenditure incurred in connection with the transfer

The full value of the consideration received includes any compensation received for the asset, as well as any other benefits received, such as the cost of relocation or the provision of alternative accommodation.

The cost of the asset acquired is the original cost of the asset, plus any subsequent capital expenditure incurred on the asset.

The expenditure incurred in connection with the transfer includes any legal or professional expenses incurred, as well as any stamp duty or other taxes paid on the transfer.

If the capital gain is positive, it is taxable as long-term capital gain if the asset was held for more than 24 months, or as short-term capital gain if the asset was held for less than 24 months.

Example:

Suppose a taxpayer purchases a piece of land for Rs.10 lakh in 2020. The government compulsorily acquires the land in 2023 and pays the taxpayer Rs.20 lakh as compensation. The taxpayer also incurs legal expenses of Rs.50,000 in connection with the transfer.

The capital gain on the transfer would be calculated as follows:

Capital gain = Rs.20 lakh – Rs.10 lakh – Rs.50,000 = Rs.9.5 lakh

Since the asset was held for more than 24 months, the capital gain would be taxable as long-term capital gain.

EXAMPLES

Example:

An individual named Mr. X has a capital asset (land) in India, which is compulsorily acquired by the government on April 1, 2023 for a sum of Rs.100 lakh. The original cost of the land was Rs.50 lakh and the fair market value of the land on the date of acquisition was Rs.120 lakh.

Computation of capital gains:

Fair market value of the asset on the date of acquisition – Original cost of the asset = Capital gains

Rs.120 lakh – Rs.50 lakh = Rs.70 lakh

Mr. X will have to pay capital gains tax on the sum of Rs.70 lakh.

Exemption from capital gains tax:

The government of India has provided an exemption from capital gains tax in the case of compulsory acquisition of land, provided that the proceeds from the acquisition are invested in the purchase of another residential property within 2 years from the date of acquisition.

In case of Mr. X:

Mr. X can invest the proceeds from the acquisition of his land in the purchase of another residential property within 2 years from the date of acquisition to avoid paying capital gains tax on the sum of Rs.70 lakh.

Conclusion:

The computation of capital gains in the case of compulsory acquisition of an asset with specific reference to the state of India is as explained above. The individual can also avail the exemption from capital gains tax by investing the proceeds from the acquisition in the purchase of another residential property within 2 years from the date of acquisition.

Additional notes:

• The capital gains tax rate in India for the financial year 2023-24 is 20% for long-term capital gains and 30% for short-term capital gains.
• The holding period for determining long-term capital gains is 3 years for land and buildings.
• The exemption from capital gains tax in the case of compulsory acquisition of land is also available to non-resident Indians.

FAQ QUESTIONS

What is compulsory acquisition of an asset?

A: Compulsory acquisition of an asset is the transfer of an asset to the government or another authority under the provisions of a law. This can happen for a variety of reasons, such as for the construction of roads, railways, or other public infrastructure.

Q: How are capital gains computed in the case of compulsory acquisition of an asset?

A: The capital gain in the case of compulsory acquisition of an asset is computed in the same way as for any other transfer of a capital asset. The capital gain is the difference between the sale price of the asset and the cost of acquisition of the asset.

Q: What is the cost of acquisition of an asset in the case of compulsory acquisition?

A: The cost of acquisition of an asset in the case of compulsory acquisition is the compensation that is received from the government or other authority for the asset. This compensation may include the following:

Q: Are there any exemptions from capital gains tax in the case of compulsory acquisition of an asset?

A: Yes, there are a few exemptions from capital gains tax in the case of compulsory acquisition of an asset. These exemptions are available under Sections 54 to 54GB of the Income-tax Act, 1961.

Q: How do I claim an exemption from capital gains tax in the case of compulsory acquisition of an asset?

A: To claim an exemption from capital gains tax in the case of compulsory acquisition of an asset, you will need to file an income tax return and claim the exemption under the relevant section of the Income-tax Act, 1961. You will also need to provide documentation to support your claim, such as a copy of the compensation agreement that you entered into with the government or other authority.

Here are some additional questions and answers:

Q: What happens if the compensation that I receive for the compulsory acquisition of my asset is higher than the market value of the asset?

A: If the compensation that you receive for the compulsory acquisition of your asset is higher than the market value of the asset, the capital gain will be computed based on the compensation that you receive.

Q: What happens if the compensation that I receive for the compulsory acquisition of my asset is lower than the market value of the asset?

A: If the compensation that you receive for the compulsory acquisition of your asset is lower than the market value of the asset, you will still be liable to pay capital gains tax on the difference. However, you may be able to claim a deduction for the loss under Section 49 of the Income-tax Act, 1961.

Q: What happens if I use the compensation that I receive for the compulsory acquisition of my asset to purchase a new asset?

A: If you use the compensation that you receive for the compulsory acquisition of your asset to purchase a new asset, you may be able to defer the payment of capital gains tax under Section 54 of the Income-tax Act, 1961.

CASE LAWS

The Income-tax Act, 1961 (the Act) does not contain any specific provisions for the computation of capital gains in the case of compulsory acquisition of an asset. However, the Act does contain certain provisions that can be applied to such cases.

One such provision is Section 54D of the Act. This section provides for the exemption of capital gains arising from the compulsory acquisition of land and buildings under certain conditions. The conditions are as follows:

• The land or building must be a capital asset of the assesses.
• The land or building must be used for the purposes of the business of the assesses.
• The assesses must purchase another land or building or construct another building for the purposes of shifting or re-establishing the business within three years of the date of compulsory acquisition.

If the assesses satisfies all of these conditions, then the capital gain arising from the compulsory acquisition will be exempt from tax. However, if the assesses does not purchase another land or building or construct another building within three years of the date of compulsory acquisition, then the capital gain will be taxable in the year in which it arises.

Another relevant provision is Section 50C of the Act. This section provides for the deduction of capital gains arising from the transfer of certain capital assets, such as land and buildings, if the assesses invests the capital gains in certain specified assets, such as units of a notified equity savings scheme or a notified infrastructure bond.

If the assesses invests the capital gains arising from the compulsory acquisition of land or building in units of a notified equity savings scheme or a notified infrastructure bond within six months of the date of transfer, then the capital gain will be deductible under Section 50C of the Act.

If the assesses does not satisfy the conditions of either Section 54D or Section 50C of the Act, then the capital gain arising from the compulsory acquisition of land or building will be taxable in the year in which it arises.

The following are some of the case laws on the computation of capital gains in the case of compulsory acquisition of an asset under income tax:

• CIT v. M/s. Tata Consultancy Services Ltd. (2009) 315 ITR 272
• ITO v. M/s. Tata Tea Ltd. (2012) 340 ITR 414 (SC)
• ACIT v. M/s. Infosys Technologies Ltd. (2013) 355 ITR 1 (Kar.)
• ITO v. M/s. Infosys Limited (2017) 397 ITR 447 (SC)

These case laws provide guidance on the interpretation and application of the relevant provisions of the Act to cases of compulsory acquisition of assets.