Business Income or Capital Gain

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Ca. Alok Gupta (Querist)
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25 February 2008
If a real estate private limited company is transfer of land (stock in trade) to a partnership firm as a capital contribution, then transfer between transfer price minus cost is taxable under what head Business or Capital Gain.

if any caselaw.pls give?

CA Hemant T Dewani

CA Hemant T Dewani (Expert)
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25 February 2008 if the assets is trasferred the transsferred price minus cost price is taxable as business income of the pvt ltd co

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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25 February 2008 No. If the lands are stock in trade of a real estate company on sale it will be only business income will be computed.

[I pressume it is not a case covered by 45(2)]

Late CA Sampat Jain

Late CA Sampat Jain (Expert)
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25 February 2008 Section 45(3) states as under:

[(3) The profits or gains arising from the transfer of a capital asset by a person to a firm or other association of persons or body of individuals (not being a company or a co-operative society) in which he is or becomes a partner or member, by way of capital contribution or otherwise, shall be chargeable to tax as his income of the previous year in which such transfer takes place and, for the purposes of section 48, the amount recorded in the books of account of the firm, association or body as the value of the capital asset shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset.

NOW LOOK THE SECTION IS APPLICABLE ON TRANSFER OF CAPITAL ASSET . STOCK IN TRADE IS NOT A CAPITAL ASSET. THEREFORE ON TRANSFER OF STOCK IN TRADE THE QUESTION OF CAPITAL GAINS DOES NOT ARISE.

IT WILL BE A PROFIT FROM BUSINESS FOR THE CO TRANSFERRING THE STOCK

CA Saurabh Maheshwari

CA Saurabh Maheshwari (Expert)
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26 February 2008 TAXABLE AS BUSINESS INCOME FOR COMPANY

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