Sec 56

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Querist : Anonymous

Querist : Anonymous (Querist)

05 March 2012 If a director gifts his land to the company, is there any tax on it? As per my understanding Sec 56(2)(viia) speaks only about shares only and not any other capital asset / property. Please correct me if i am wrong. Further if the land is leased by the company for 30 years to another company, would it be STCG or LTCG? Please help.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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05 March 2012 The gift is not treated as transfer and accordingly the gift is not taxable in the hands of the director.

In the hands of the company also, the gift is not taxable. Section 56(2)(vii) does not apply to a company and Section 56(2)(viia) deals with gift if shares.

So there is no tax liability in the hands of either the director or the company.

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Querist : Anonymous

Querist : Anonymous (Querist)

05 March 2012 Thank you Mr. Siddhartha for your guidance. Please guide for the second part that if the land is leased by the company to another company for 30 years, would it be STCG or LTCG as according to my understanding due to Sec 2(14) and 2(47), capital gain would be attracted if land is leased. Please guide.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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06 March 2012 Leasing an asset is NOT transfer as defined by Section 2(47).

Accordingly, capital gain does not arise on leasing the land.

Querist : Anonymous

Querist : Anonymous (Querist)

07 March 2012 Thanks Mr. Siddhartha once again. One more thing I wud like to know is that if on leasing the land for a period of 30 years, a consideration is recieved in lumpsum as a one time premium (say Rs 1 Cr), would this amount to tax or it would be a capital receipt and not subject to tax. Please guide.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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07 March 2012 Such consideration shall be taxable under the head Income from Other Sources.

It is not income from house property becuase LAND has been let out. Building has not been constructed on such land accordingly it is NOT a property.

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