Sec. 47 of Income Tax Act... Help needed

Tax planning 2579 views 2 replies

Shreyans

Student

117 Points Joined August 2007

There are three sister concerns.. X Pvt. Ltd., Y Pvt. LTD., and Z Pvt. Ltd... involved in similar business of thermoforming.

X Pvt. Ltd is incurring heavy losses, and its is decided to sell part of the fixed assets of X to Y, and ABC Pvt. Ltd. (which belongs to a totally different group), and amalgamate X with Z (along with some fixed assets, and all the balance networth.)

Consider the following transactions...

1. FA -Machinery (WDV) Rs.45,00,000/- trfd. to Y @ a loss of Rs. 14,00,000/-

2. FA -Land and Building (WDV) Rs. 1,00,00,000/- trfd. to ABC Pvt. Ltd. for Rs.2,40,00,000/- (I think in the normal course of business it is a deemed capital gain of Rs.1,40,00,000/-)

3. FA -(balance WDV) Rs.5,00,000/- and other assets and liabilities merged with Z Pvt. Ltd.

All are depriciable assets..

My question is what are the tax implications of the above transactions, .. like...

will deemed capital gain be attracted to X in case of transfer of assets to ABC Pvt. Ltd(i.e. whether the transaction with ABC Pvt. Ltd be regarded as "transfer")?,

Is the date of amalgamation vis-av-vis date of transfer to ABC Pvt. Ltd. important to claim the benifit of Sec. 47?.... i.e. What if assets to ABC Pvt. Ltd are trfd. in AY 2008-09, and amalgamation takes place in AY 2009-10?...

What if instead of loss in transaction no.1, there is a profit?

Is any other sec., other than Sec. 47 is of any relevance here?

Pls. Consider this urgent... thanks

Replies (2)

S.Srinivasaraghavan

Chief Financial Officer and Co

11318 Points Joined September 2007

What do you mean by transfer of land by ABC Pvt Ltd.?
If it is a sale no doubt capital gain would be attracted. If it is otherwise, you have to say what is the nature of transfer.

Transfer by way of amalgamation is not regarded as transfer if the conditions (vi),(via), (viaa) stated in section 47 are satisfied.

In the case of machinery the sale results into a profit only if the sale value is more than the WDV of the block of assets under a category. See if you can take advantage of that before amalgamating.

Guest

428180 Points Joined August 2012

Sir,

One Pvt. Ltd Co. Going to purchase some Assets & Liabilities from the Propritorship Concern ( The Propritor is Share Holder in Pvt. Ltd. Co) In the above transction The Director will be alloted to Share of the same Value . What will be the Tax liabilities in the propritorship concern.

Thanks

Nawal