Tax treatment

In my opinion, the same should be taxable in hand of company as Short Term Capital Gains(by virtue of section 50), but nothing should be taxable in hands of director.....

But in the following cases the amount shall be taxable in hands of director as well, by virtue of section 56(2)(vii):

1) asset(whose FMV exceeds Rs. 50,000) is transferred without any consideration, then the whole FMV is taxable in the hands of transferee(i.e. Director), as income under head-"other sources".

2)asset is t/f for a consideration, which is less than FMV of that asset by Rs. 50000, then the difference b/w FMV and sale consideration shall be taxbale in the hands of the director,as income under head"other sources" 

Originally posted by : Sumit Grover
	In my opinion, the same should be taxable in hand of company as Short Term Capital Gains(by virtue of section 50), but nothing should be taxable in hands of director..... But in the following cases the amount shall be taxable in hands of director as well, by virtue of section 56(2)(vii): 1) asset(whose FMV exceeds Rs. 50,000) is transferred without any consideration, then the whole FMV is taxable in the hands of transferee(i.e. Director), as income under head-"other sources". 2)asset is t/f for a consideration, which is less than FMV of that asset by Rs. 50000, then the difference b/w FMV and sale consideration shall be taxbale in the hands of the director,as income under head"other sources"

I think Car is not covered under the definition of property for the purpose of section 56(2)(vii).

Dear Manish

Can you please tell me its source so that I can correct myself, if i am wrong. Because, as per my interprertation, there is nothing mentioned in the aforesaid section which excludes the car from property.

Originally posted by : Sumit Grover
	Dear Manish Can you please tell me its source so that I can correct myself, if i am wrong. Because, as per my interprertation, there is nothing mentioned in the aforesaid section which excludes the car from property.

Dear Sumit

Please check the explanation to section 56 (2)(vii) which read as under:-

"Property" means the following capital assets of the assessee, namely:-

 Immovable property, being land or building or both;

 Shares and securities;

 Jewellery;

 Archaeological collections;

 Drawings;

 Paintings;

 Sculptures;

 Any work of art; or

 Bullion.

Yeah rite....Thnx for the same...

thanks for information

You have to check whether the director is holding 10 % or more shareholding, because if it is holding 10 % shares than the transfer of car to shareholder will be treated as deemed dividend u/s 2(22)(a) upto the amount of accumulated profits of company.

In such a case the company will be liable to pay CDT u/s 115-O of income tax act and the dividend (Car) will be exempted in the hands of director (shareholder)

Originally posted by : CA Vishal Jain
	You have to check whether the director is holding 10 % or more shareholding, because if it is holding 10 % shares than the transfer of car to shareholder will be treated as deemed dividend u/s 2(22)(a) upto the amount of accumulated profits of company. In such a case the company will be liable to pay CDT u/s 115-O of income tax act and the dividend (Car) will be exempted in the hands of director (shareholder)

As per my view the condition of 10% holding is not applicable in case of section 2(22)(a). The condition of 10% holding is apllicable in case of deemed dividend u/s 2(22)(e). Please correct me if I am wrong.

Dear Bharat ,

Director covered under the definition of EMPLOYEE. So as per my opinion it is a Perquisite. Pls refer one of the provision of perquisite. 

TRANSFER OF ANY MOVABLE ASSET BELONGING TO THE EMPLOYER DIRECTLY OR INDIRECTLY TO EMPLOYEE OR ANT MEMBER OF HIS HOUSEHOLD.

Calculation of Perquisites :

Actual Cost of Car
Less : Depreciation @ 20% under Reducing Balance Method
Less : Amount recovered from employee , if any

I think varsh*t is right.

Originally posted by : CA Manish Malu
	As per my view the condition of 10% holding is not applicable in case of section 2(22)(a). The condition of 10% holding is apllicable in case of deemed dividend u/s 2(22)(e). Please correct me if I am wrong.

Thanx a lot manish for correcting me
you are right, condition of 10% is not applicable in section 2(22)(a)