CAPITAL GAIN ON TRANSFER OF BUSINESS RIGHTS

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(Querist)


27 July 2010

SIR

THE X. ASSESEE HAS MADE A AGREEMENT WITH THE "Z" ACQUIRER THAT A PARTICULAR BUSINESS IS TRANSFERED FOR 51 PROFITS, AND THE BUSINESS HEREAFTER WILL BE RUN BY THE ACQUIRER.

THE BUSINESS INTEREST TRANSFERRED IS 51%, THERE BY ENTITLING THE X ASSESSEE TO RECIEVE THE SHARE OF PROFITS FROM THE SAID BUSINESS TO 49% AFTER EXPENSES & DEDUCTION OF TDS.

THE CONSIDERATION PAID FOR ACQUISITION OF BUSINESS IS CALCULATED AS NO.OF SUBSCRIBER AS ON DATE FOR FUTURE 12 MONTHS.

MY QUERY IS WHETHER THE BUSINESS TRANSFER IS TAXABLE AS LONG TERM CAPITAL GAIN? OR TAXABLE AS BUSINESS INCOME? OR WHETHER IT IS CAPITAL RECIEPT NOT TAXABLE TO TAX? AND UNDER WHICH SECTION OR CASE LAWS ?

MY PARTICULAR OPINION IS OF "LTCG" AS RIGHT TO CARRY BUSINESS IS TRANSFERED,

BUT MY COLLEGUE IS OF THE OPINION OF "TAX FREE CAPITAL RECIEPT" AS NO ASSET IS TRANSFER AND RIGHT IS TRANSFER HE EVEN CLAIMS IT TO BE "TAX FREE GOODWILL"

PLEASE EXPLAIN ?



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