income tax

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kushal agrawal (Querist)

31 May 2011 at the time transfering asset through holding company to subsidary it is not regarded as transfer and capital gain is not charged in the hand of holding co.but if subsidary co. convverted asset in sit within 8 yrs the exemption is not allowed and if subsidary sale that asset it is not exempted whats the logic?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

31 May 2011 Basically in such cases the holding company is owning 100 % Share Capital of the Subsidiary Company.

It can be said that it is transfer from one hand to another hand of the owner and as such there is no profit or gain said to be generated by the holding company.

But when subsidiary company converts the transferred capital asset into stock in trade , the capital asset loses its character and in such case it will be taken at par as if a person is converting its Capital asset into SIT.

In another case when the whole capital is not remained to be owned by the holding co. , it becomes a case of change in ownership and as such the capital gain which was not charged earlier to tax becomes taxable.

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