URGENT - APPLICABILITY OF CAPITAL GAIN TAX

Tax queries 722 views 3 replies

RITESH AGARWAL

PARTNER

34 Points Joined March 2009

Hello Friends,

I have come across a recent tax case on applicability of Capital Gain in the line of the below mentioned facts:

1. The Property was constructed, developed by X ltd. In the year 1970

2. The said property was purchased by Ms. Sahani for Rs. 150000/- in 1975 but the title deed was not registered till date. As such the title remain with X ltd. But the right to use the property have been given to Ms. Sahani, amounts to transfer for the purpose of Income Tax Act.

3. Further the said property is transferred to Y ltd , the title still remaining with X limited @ Rs. 150000/- in the year 1992-93

4. Now coming to 2009 we are at delimma as to ascertain the fair market value in the hands of Y limited as Y limited is now nominating/assigning the said property to S limited. Please note the title still remains with X limited.

Now my queries are:

Whether this transfer of property from Y to S limited will amount to transfer
If yes what will be the amount /fair value of the same. The Y limited is contending that since the title is not present , the section 50C to arrive at the stamp duty valuation does not apply. As such they even can transfer the same at 150000/- without any Capital Gain.

As such I need your valuable opinion.

Also suggest if any case laws are there with respect to this facts.

I am based at Kolkata……if you feel please call me up at 9330450701

Thanks & Regards

CA. Ritesh Agarwal

Replies (3)

kabirsen

student

251 Points Joined January 2009

answer to point a) y to s limited should not be t/f. because nomination of a person is not equivalent t/f of property/deemed t/f of property by way of t/f of possession of property. nomination is not defined under income tax act. so we will go by the normal meaning of nomination- which does not equal to t/f of possession.

RITESH AGARWAL

PARTNER

34 Points Joined March 2009

Dear Kabirsen,

Thanks for your interest in the topic.........please note that extinguishment of right to use the property amounts to transfer as per the said act. As such the property is removed from the Balance Sheet of Y limited.

Thanks & Regards

kabirsen

student

251 Points Joined January 2009

if the co. y has removed the property from books of a/c...then it is clear the co. is acknowledging the t/f of property and 50c will apply accordingly.

bt my question is why the co. is removing the property frm its books on mere nomination of the property?? nomination only gives right to the nominee to claim the property when y ceases to exist. the property should hv remained in co. books and only a seperate disclosure shud hv been made.

nw...coming to ur point on t/f of right. since the cost of aquisition of right of nominee is not definite for co. y the co. will not incurr capital gain tax(the same reason..why g/w of profession is not subject to capital gain tax).