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INCOME TAX QUERRY

Tax queries 406 views 2 replies

I HAVE A FOLLOWING QUERRY IN INCOME TAX

If a holding company holding 60% shares in subsidiary company transfers shares held as "stock in trade" at book value i.e Rs. 800,000. The Fair market value of the shares as on date of transfer is Rs.12,00,000. Is it correct on behalf of assessing officer to tax the difference between fair market value and book value.

Will there be any difference if the above asset is not stock in trade but held as "investment". 

 

Please let me know as soon as possible

 

Thanks & Regards.

Replies (2)

Dear Ashish,

We have Sec 45(2) where Conversion of Capital Asset into SIT is charged to tax as Capital Gain computed as per FMV on the date of transfer...

But there is no provision that sets the treatment in case it is other way round i:e Conversion of SIT into Capital Asset.(as Investment)

Therefore, AO is not justified in his action.

hey thx Aamir for the prompt reply....i have posted one more querry in relation to service tax...see if you can help me in repect of that...

Thanks & regards

Ashish


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