AAFM CWM_LEVEL_2 Exam - Topic 5 Question 6 Discussion

Actual exam question for AAFM's CWM_LEVEL_2 exam

Question #: 6
Topic #: 5

Section C (4 Mark)

Read the senario and answer to the question.

Saxena bought agricultural land in notified urban limits of Mumbai on 15-June-1996 for Rs. 6 lakh and had been using the same for agricultural purposes. However the land was compulsorily acquired by the Government on 15-July-2003 and the compensation fixed was Rs. 25 lakh. Out of this, Rs 10 lakh was received by Saxena on 15-Jan-2005 and the balance on 06-Apr-2005. Saxena was not satisfied with the compensation and filed a suit in the court. The compensation was enhanced by Rs 8 lakh which was received on 25-Mar-2008. Which one of the following statement regarding capital gains arising from these transactions is correct:

AThe entire enhanced compensation of Rs. 8 Lakh shall be taxable.

BThe entire enhanced compensation of Rs. 8 Lakh shall be exempt.

CThe entire original compensation of Rs. 25 Lakh shall be exempt.

DRs. 10 lakh from original compensation is exempt, while Rs. 15 lakh is taxable.

Show Suggested Answer

Suggested Answer: B

by Gayla at May 07, 2022, 04:32 AM

Limited Time Offer

25%

5 months ago

This looks like a capital gains tax scenario with compulsory land acquisition. Need to carefully track the dates and compensation amounts.

upvoted 0 times

...