Sale of residential property owned by the Company

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bittu (Querist)
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08 April 2010 One of my client has a residential property in his company's name. He wants to sell this particular property. For this purpose what would be the most suitable course of sale to reduce the tax liability: 1. To sell all the shares of the company to the buyer or 2. To sell the property separately. Also pls guide regarding the tax implications. Thank you for your time and patience.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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11 April 2010 Section 56(2)(vii) introduced by the finance act 2009 to tax sale of shares in a closely held company if the sale consideration is below fair market value as gift if the difference exceeds Rs. 50,000/- in the hands of the buyer. So your cleint will not have to pay much tax on the sale if the same is below fair market value in case of sale of shares but the buyer of shares will have to pay tax on the difference.

So in any case the sale of shares should be at the fair market value which can be the stamp duty valuation for the sale so that there is no deemed income in the hands of either party.

In case of sale of property below FMV the sale would be taxable at the stamp duty value u/s 50C though the buyer would not have to pay any tax even if the same is bought below FMV.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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11 April 2010 So choice is yours. IF the other party if ready to pay tax as gift on sale then choose shares option and minimise ur clients liability for tax and if not then any method would yield the same tax though you save on stamp duty at the time of transfer of shares.

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