Messages

I now see what satyenveshi was referring to. It is not s. 50C but is s. 50D which reads as follows:

"50D. Fair market value deemed to be full value of consideration in certain cases.—

Where the consideration received or accruing as a result of the transfer of a capital asset
by an assessee is not ascertainable or cannot be determined, then, for the purpose of
computing income chargeable to tax as capital gains, the fair market value of the said
asset on the date of transfer shall be deemed to be the full value of the consideration
received or accruing as a result of such transfer."

So, the consideration being received by you i.e. the value of the 20 flats are not capable of being ascertained. So, the FMV of the land will be taken to be the consideration.

If the owner transfers the land to his son, the following will be the consequences:

(i) stamp duty will be payable on the gift depending on the local laws;

(ii) the gift will not be taxable u/s 56(2) as it is to a "relative";

(iii) the cost of the land to the father will be taken as the cost of acquistion in the hands of the son u/s 49;

(iv) the period of the father's holding will be taken to be the son's holding to  make it a "long-term capital asset";

(v) If the son enters into the development agreement after he acquires the land from the father, then the capital gains will be taxable in his (the son's) hands;

(vi) the son will be entitled to the deduction u/s 54F if he fulfills its conditions.

I don't see any downside to your proposal other than that of the double oincidence of stamp duty - one at the time of gift and the second time at the time of the POA/ conveyance.

To your query to Satyenveshi, S. 50C provides that the stamp duty valuation shall be deemed to the consideration if it is higher than the actual consideration received by the transferor.

Even if Apex Court  decides the issue in favour of public at large,  there is every possibility that a retrospective amendment will be brought into the statute by the law makers. Ergo, you are advised to estimate cost of litigation and risk involved before finalising the issue.

LOL. Very sensible advice indeed. There is no point fighting the Govt these days as Vodafone and others have realized.

[Jasbir Singh Sarkaria]

See, the problem arises because the law (s. 2(47)(v) &(vi) of the Income-tax Act) deems (a) the handing over of possession or (b) the enjoyment of property to amount to a "transfer".

The language of the section is as follows:

(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882); or

(vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a cooperative society, company or other association of persons or by way of any agreement or any arrangements or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.

As you can see, the language is very wide. Now, even if you do not execute a POA, the fact of the matter is that the developer will enter upon the land, demolish the existing structures and build a new building. Surely, this amounts to "allowing of the possession of any immovable property to be taken" and has the "effect of transferring, or enabling the enjoyment of, any immovable property".

Also, by the time the AO takes up your case for scrutiny, considerable development on the land will have taken place. So, your arguing that you have not given any rights to the builder will be of no avail. If you do so, you will only embroil yourself in fruitless and expensive litigation.

The ruling in Mr. Jasbir Singh Sarkaria 221 CTR 100, 294 ITR 196 analyzes this position very well and there is also a judgement of the Bombay High Court on the same point in Chaturbhuj Dwarkadas Kapadia (260 ITR 491).  You can also read an article on this by K.K.Ramani in BCAS (http://bcasonline.org/articles/artin.asp?369)

I would urge you to reconcile yourself to the prospect of paying capital gains tax and explore how you can minimize that by investing in s. 54EC bonds etc.

[for purposes of the Act]

I have been told that if a payment doesnot covered under DTAA then TDS is not required. In the given case, FTS is not covered in DTAA with UAE and therefore it will be treated as Business Income and fall under that clause of DTAA. Since for Business Income, PE in India is essential for TDS and in the absence of PE in India, no TDS is required.

This understanding is correct. The fees will constitute business profits under the DTAA. In the absence of a PE, the profits are not assessable to tax in India.

The amendment to the Act merely clarifies as to when the income shall be deemed to have accrued for purposes of the Act. However, this has no impact on the DTAA.

It is well settled that the DTAA will prevail over the Act where it is beneficial to the assessee (s. 90(2)). So, the income will continue to enjoy exemption under the DTAA notwithstanding the amendment to the Act.

[through paid vouchers which are not transferable and usable only at eating joints, to the extent the value thereof either case does not exceed fifty rupees per meal]

Respected members

Please enlighten  me regarding the taxability of Sodexo Meal Coupons in the hands of employees.

Thanks

Well, s. 17(2)(vii) defines "perquisite" to mean "the value of any other fringe benefit or amenity as may be prescribed".

Rule 3 (7) (iii) provides for the valuation of fringe benefits in the following words:

The value of free food and non-alcoholic beverages provided by the employer to an employee shall be the amount of expenditure incurred by such employer. The amount so determined shall be reduced by the amount, if any, paid or recovered from the employee for such benefit or amenity:

Provided that nothing contained in this clause shall apply to free food and non-alcoholic beverages provided by such employer during working hours at office or business premises or through paid vouchers which are not transferable and usable only at eating joints, to the extent the value thereof either case does not exceed fifty rupees per meal or to tea or snacks provided during working hours or to free food and non-alcoholic beverages during working hours provided in a remote area or an off-shore installation.

So, Sodexho Meal Coupons are a "perquisite" but exempt to the extent of Rs. 50 per meal.

When President Madam Pratibha Patil finds time from her foreign trips to come back to India and put her rubber stamp on it.

What are the terms under which you were appointed? Was it a contractual appointment for a time period? Why were services terminated? Was there misconduct etc? Also, why were you waiting for 8 years? Unless you are able to give solid reasons for the delay, courts may be reluctant to entertain your challenge.

[Hiaben Jayantilal Shah v. Income-tax officer]

If 50C does not apply, then how can the department change the agreed consideration? S. 55A does not authorise the substitution of the consideration by the FMV as held in Hiaben Jayantilal Shah v. Income-tax officer 310 ITR 31 (Guj). It was held "There is no provision in the Act which permits the Assessing Officer to disturb the sale consideration and at least section 55A cannot be invoked for the said purpose. [Para 14]"

55A is meant for the cost of acquisition as of 1.4.1981.

If you have a lot of immovable property then a slump sale may not be practicable because of the stamp duty exposure. Have you considered keeping the title to the properties in the old firm but giving a perpetual & irrevocable tenancy to the new firm? If the stamp duty law in your State is benign, then this may be workable.

What are the other assets in the business? If the other assets are nominal in value, then the department may argue that s. 50C should apply on the basis that the major value is taken up by the immovable property.

If 50C does not apply (on the basis that what is transferred is not "land or building") then one can fix the consideration at the net worth. There is no provision by which the consideration can be taken at the market value.

See, as you have rightly stated, the same issue had come up in the context of s. 194H on whether there was a "sale" of the sim card or not. The view taken was (from Vodafone Essar):

The argument that there is a "sale" of a Sim Card is not acceptable because a Sim Card has no value or use for the subscriber other than to get connection to the mobile network. The supply of the Sim Card is only for the purpose of rendering continued services by the assessee to the subscriber of the mobile phone. Consequently, the charges collected by the assessee at the time of delivery of Sim Cards or Recharge coupons is for rendering services to ultimate subscribers. The distributor is the middleman arranging customers or subscribers for the assessee after ensuring proper identification and documentation. Besides the discount given at the time of supply of Sim Cards and Recharge coupons, the assessee is not paying any amount to the distributors for the services rendered by them like getting the subscribers identified, doing the documentation work and enrolling them as mobile subscribers to the service provider namely, the assessee. The argument that the relationship between the assessee and the distributors is principal to principal basis is not acceptable. The distributor is an agent and canvasses business for the assessee. The terminology used by the assessee for payment to the distributors is immaterial. In substance the discount given at the time of sale of Sim Cards or Recharge coupons by the assessee to the distributors is a payment for services rendered to the assessee and falls within s. 194H.

The same logic should apply here. In fact, the Court relied on the VAT judgement in the case of the same assessee. So, service-tax would be payable.

The problem is that the two firms, though constituting the same partners, are two different entities. The only exception given in the Act is to the conversion of a firm into a LLP. So, when one firm transfers its assets to the other firm, there is a "transfer". If consideration is received, there will be a tax liability. Why don't you detail the procedure that you propose to follow (who gets what etc) so it can be looked up.

Which country? Is there anything in the Double Taxation treaty? The DDT is paid by the company for itself and not for the shareholder. This was held by the Bom HC in Godrej in the context of section 14. So, the shareholder has not "paid" the DDT and he would not be entitled to claim credit ordinarily speaking subject to the contrary in the Double Taxation Treaty.

Pl check in CIT vs. Bokaro Steel Ltd 236 ITR 315, CIT v. Karnataka Power Corpn 247 ITR 268 and CIT vs. Karnal Co-operative Sugar Mills Ltd 243 ITR 2 and that of the Hon'ble Delhi High Court in Indian Oil Panipat Consortium Ltd. vs. ITO 315 ITR 255. In all these it was held that pre-operative income could be setoff against pre-op expenditure.

there was addition u/s 40(a)(ia) now AO desires to impose concealment penalty. pl. guide on this point. as i have to reply to ao.

CA RKJINDAL

What are the facts? What is the disallowance on? Was there a disclosure in the ROI? As pawansinglaji points out, there have been a spate of judgements on s. 40(a)(i) in favour of the assessee. If you give your facts, it can be checked.