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Taxability under capital gain sec 50(c) & other inome sec 56(2)(vii)

bhaktijhaveri (proprietor) (57 Points)

02 August 2016

my client A PVT LTD, is transferring LAND & FACTORY BUILDING (CONSO) to its DIRECTORS at BOOK VALUE(WDV), whereas VALUE AS PER STAMP AUTHORITY is higher. kindly inform me regarding TAXABILITY in the hands of a transferor (i.e. PVT LTD) as well as in the hands of a transferee(i.e. DIRECTOR)?

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ajay (Student) (178 Points)
Replied 03 August 2016

Dear sir,

As far as my knowledge concern the following are implications of the above transaction as per income tax act

Taxability in the hands of transferor(PVT Ltd):

1. Split the sdv between land and building as these are to be treated as separate capital assets.

2. Compute capital gains as per section 48 for land by taking SDV as sale consideration as specified in section 50c provided it is urban agricultural land. If it is rural agricultural land capital gains won't arise

3. Compute capital gains as per section 50 for building by taking SDV as sale consideration as specified in section 50c if the entire block of building is transferred

(Or)

If the entire block of building is not transferred then deduct actual sale price (i.e. here wdv of that particular block) from wdv of the building block as per 43(6)

Taxability in the hands of Transferee (director):

The difference between SDV and WDV will be taxable under head IFOS provided the difference between them exceeds 50,000 rupees as per section 56(2)(vii)

Regards,

Ajay