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Understatement of consideration
î What is the recourse available with the AO ?
î Can AO refer to the Valuation Officer for
ascertaining FMV of the transferred capital
asset ?
î What are the consequences if the Valuation
Officer arrives at a value higher than the
stated consideration ?
eference to Valuation Officer
î Section 55A of the Income tax Act, 1961
î Specific powers to the AO for referring to the
Valuation Officer if in the opinion of AO the
value of the asset as claimed by the
assessee is less than the FMV of the asset.
î eference only for the purpose of
ascertaining FMV for the purpose of
ChapterIV of the Act
eference to Valuation Officer
î eference in the case of property purchased
or constructed, etc
î Addition by the AO u/s 69, 69B, 69A of the
Act which fall in Chapter VI which is outside
the purview of section 55A
î
î Section 142A introduced by The Finance
(No. 2) Act, 2004 w.r.e.f. 15-
15-11-
11-1972
Section 142A
î To estimate the value of any investment
referred to in section 69, 69B, 69A of the Act
î Introduced by The Finance (No. 2) Act, 2004
but made effective from 15-
15-11
11--1972
î Proviso to the effect that section not to apply
to assessments which have become final &
conclusive before 30th day of September,
2004
î
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åuestions
î Whether AO can refer a capital asset to the
Valuation Officer for ascertaining the FMV of
the asset ?
î What are the consequences in case the
Valuation Officer arrives at a FMV higher
than the stated consideration ?
Understatement of consideration
î Section 52(2):
FMV of the asset transferred exceeds the stated
consideration by 15% than FMV be taken as the full value
of consideration for the transfer.
etirement of partner from firm
î Applicability of section 45(4)
î Partnership firm is not a separate legal
entity
î Status prior to amendment by the
Finance Act, 1987
î
+('
¦
*"*"!"
î $1
++(. *"00
î ¬
/
(( *""*"
Section 45 (4)
î Whether transfer ?
î Whether retirement of a partner covered ?
î X(2(
î 3 3
4
( !
#
î
44
+4( 5X(3
î ¬
4+( 6¬.( !0*
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etirement of partner from firm
î Amount received in excess of capital balance on
retirement from the firm.
î Status prior to amendment:
î Held, not taxable as it is realisation of the pre
existing right
î (
7
*""!*##
î +
+3
3+
X *""*
89
î Held, taxable as resulting in transfer & retirement
is different form dissolution of the firm.
î
+'
)
+
!"$(
Partnership firm
î etirement of a partner
± Capital asset taken over by the retiring partner
± esulting in conversion into proprietorship
± Capital asset owned by the firm continuing with remaining partner
± etiring partner getting more than cr in his capital a/c
± etiring partner given proportionate share in the capital asset
î Dissolution of firm
î Transfer of capital asset
± By partner to firm
± By firm to partner
Family arrangements
î Whether transfer of property in family
settlement is chargeable to capital gains
tax?
î Family arrangements made voluntarily to
resolve the disputes among members of a
family did not amount to transfer.
î No capital gain arises from the transaction
î '
+
+!"
¬
Family Arrangements
î Cost of acquisition in the hands of the
member receiving the asset after the
settlement
î Cost to the previous owner and not the
amount mentioned in the family settlement
deed
CIT v. Shanti Chandran (2003) 127 Taxman
475 (Mad)
¬c
c
%
Full value of the consideration received
or accruing as a result of transfer of
capital asset less
less..
(
(
1. Land used for agricultural purposes for the last 2 years
by assessee or his parents
parents..
2. Land purchased for agricultural purposes with in a
period of 2 years from transfer
transfer..
3. Capital gains to the extent utilized for the new asset
exempt..
exempt
4. New asset not to be transferred for a period of 3 years
5. In case transferred cost of acquisition to be after
adjusting capital gains exemption availed
6. Unutilized amount to be deposited in the capital gains
scheme a/c
Issues
Section 54B
î Exemption only to individual
î The asset may be short term or long term
î Land may be in urban area
Shares
î Whether business income or capital gains
î Period of holding
î Exemptions
î ates of taxes
î Special provisions
Circular No.4/ 2007
î Associated Industrial Development Company 82 IT 586 (SC)
(i) Capital Asset acquired prior to 01
01..04.
04.1981 FMV as on
01..04.
01 04.1981 may at the option of assessee be deemed
to be Cost of Acquisition
Acquisition..
2(22
22)(c)
)(c) Accumulated profits
Section 50
50BB
- Sales of one or more undertaking or unit
- Owning & holding undertaking to ascertain
short/ long term gains
- Net worth of the division to be cost of
acquisition/ improvement
- No indexation for long term capital asset
asset..
- Depreciable assets
assets--WDV
WDV;; otherwise book
values
- evaluation to be ignored
Section 53 of the Transfer of
Property Act
Buy back of shares
î Capital gains chargeable to tax u/s 46A