Querry:Demerger u/s 2(19AA) of IT Act.
P.D.RUNGTA
Querry:Demerger u/s 2(19AA) of IT Act.
A Private Limited company which is a NBFC company has shown share purchased in investment. This Private Limited company is in the business of export. Now this Co. wants its share investment portfolio which constitute shares of 10 to 12 companies to transfer via demerger of its investment unit (which is shown as investment in balance sheet not as stock-in-trade) to one of NBFC Co. Our query is whether transfer of investment portfolio shall come under the definition of demerger u/s 2(19AA) of the income Tax Act.
--
Regards.
Sultania
Sanjay & Co.
Chartered Accountants
Reply:1
If "investment division" is a separate business undertaking then there can be demerger of such unit. Some care is required to establish such a unit or undertaking.
Dev Kr.Kothari
Reply:2
It
will not strictly fall under the definition of an "Undertaking" as
Investment is an item of asset but not an undertaking. The definition of an
undertaking should constitute in itself to identify the following
separately
1) Separate Profit and loss account for an undertaking
2) Separate number of employee for that undertaking
3) Separate assets and liabilities for that undertaking
None of the Balance Sheet of an NBFC in India shows Investment as an separate
undertaking.And for that matter even a non NBFC company discloses its
Investments as Undertaking.
Best
Regards,
Jayesh Vora,
Director
CD Equisearch Pvt. Ltd.
Member NSE, BSE, CDSL, MCX, NCDEX, NSECD & MCXSX
1st Floor | 37 Shakespeare Sarani,
Kolkata 700 017 | India.
Tel: +91 (33) 22805601/5602 | Mobile +91 9330997285
Email: jayes...@cdequi.com
Reply:3
To my mind the scheme contemplated cannot come within the definition of demerger as per Section2(19AA).In a demerger there has to be a transfer of an undertaking.The term undertaking has been inclusively defined in Explanation 1 to section2(19AA)to refer to a part of an undertaking,unit or division of an undertaking.If there is transfer of individual assets and liabilities not constituting a business activity it will not be considered as an undertaking.in the given case some shares held in the nature of investments are sought to be transfered.to my mind this will not come within the ambit of a demerger.There is only transfer of assets which doesnot amount to a demerger.
regards
Ramaswami kalidas
Senior VP and Company Secretary
Ambuja Realty Group
Pramod Dayal Rungta
M.Com.,LL.B.,AICWA.,DISA(ICAI).,FCA,
P.D.Rungta & Co, Chartered Accountants
21 Hemant Basu Sarani, 3rd Floor, R.No.317, Kolkata 700001
( + 91 33 3028 2500(7 Lines) ( +919831007253
* pdru...@gmail.com
web: www.pdrungta.co.in
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Kshitiz Chhawchharia
Friends,
I have 3 related queries on above:
- For computing capital gains on residential house property (where flat was booked at launch of project and instalments paid over 2-3 years until possession), what is treated as the date of acquisition of the asset:
(i.) Date of sale-purchase agreement
(ii.) Date of payment of last instalment
(iii.) Date of actual possession
(iv.) Date of the registration of property
- For claiming exemption under Sec 54, capital gains have to be re-invested in another house property within 2 years (for purchase) or 3 years (for construction). If amount re-invested is less than the Capital gain, then exemption is pro-rata. In this case, how is the “amount re-invested” computed if the assessee books another flat at initial launch period and will make payment in instalments over a period of next 2 or 3 years until possession is taken? For exemption purposes, will the agreement amount be used or actual instalments made within the relevant period (2 years)?
- Sec 54 also stipulates that the assessee is required not to sell the newly acquired house property within a period of 3 years from date of purchase. What is treated as date of purchase of new house property?
Thanks in advance for your responses.
____________________________________________________
Kshitiz Chhawchharia | B Chhawchharia & Co. | 8A & 8B Satyam Towers, 3 Alipore Road | Kolkata | 700 027 | India |
(: +91 (33) 2479 - 1951 | È: +91 (0) 98304 - 92324 | 6: +91 (33) 2479 - 1952 | *: ksh...@bccoindia.com
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Ramaswami Kalidas
In the absence of any provision to the contrary,the concept of sale of an immovable property has to be gathered from Section 54 of the Transfer of property Act.The true test for determining as to when the right over the property passes is the intention of the parties.Although registration is a primafacie proof of an intention to transfer,it is not a proof of an operative transfer if there is a condition precedent agreed by the parties that there should have been payment of the full price or that the deed has to be delivered.If the party has clearly indicated as was the case in Raj Rani Devi Ramna Vs CIT(201 ITR 1032)that inspite of execution and registration of sale deed the sale would be complete only upon payment of the full price,transfer would be complete only when full payment is received.
If there are no such conditions precedent as above,it has been held that an agreement to sell coupled with possession would constitute transfer within the meaning of Section 2(47) (Chaturbhuj Dwarakadas kapadia vs CIT(260 ITR 491).
Based on the query, in my view,date of acquisition would be the date when the agreement of sale has been executed coupled with delivery of possession.
Query No.2 and 3
As per Board circulars no.471 dated 15.10.86 and circular no.672 dated 10th Dec.1993,allotment of a flat or house by state housing Boards or cooperative societies would tantamount to purchase of a house as on the date of allotment itself.In sashi varma vs CIT (224 ITR 106)it was held that the assessee would be entitled to exemption from capital gains in the cases of allotments as above even if the construction is not completed within the statutory time period.The supreme court's observations while interpreting the term"purchase' in Section 54 in CIT vs.T.N.Arvinda reddy(120ITR46)are important.The court held that the term purchase should be understood in a liberal sense ,in the sense it would be understood by a layman.Therefore if the buyer has paid the price and obtained possession of the property it would amount to purchase as held in Balraj vsCIT(254ITR 22).If the agreement with the seller allows possesion to be made over to the buyer even without full payment of the price, to my mind the date on which possession is received would be the date of purchase.Registration of the property in the buyer's name is not mandatory for recognising a transfer as held in CIT vs.Podar cements (226ITR 625(SC).
As can be seen from the above no straight jacket solutions are available in the law for answering such issues.The intention of the parties involved would also influence drawing of conclusions in such matters.
regards
Ramaswami Kalidas
Senior VP and Company Secretary
Ambuja Realty Group
From: ksh...@bccoindia.com
To: eserve...@googlegroups.com
Subject: e-Serve Query on Capital Gain Sec 54 & 54F
Date: Fri, 19 Feb 2010 15:13:20 +0530
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madhu tapuriah
I have one query before the members of this group. An individual assessee having income from proprietory concern e-filed his income tax return no 4 for assessment year 2008-09 within the due date.The self assessment was duly paid after considering the deduction claimed u/s 80C & 80D if the Income Tax Act.However while uploading ITR 4,the schedule allowing deduction u/s 80C & 80D was inadvertantly left blank and thus the total income was shown higher by the amount of deduction u/s 80C & 80D.The ITR 4 was thus uploaded with the same figure of tax liability.
Now the return has been processed u/s 143 (1) showing the higher taxable income and thus raising the income tax demand.
It may also be noted that the deduction u/s 80C & 80D was claimed on contribution to PPF Account & mediclaim premium respectively.These payments were shown in his individual balance sheet and as such not uploaded because ITR 4 allows only the balance sheet & profit & loss account figures to be uploaded.However interest on PPF Account has been shown in the Schedule of Exempt Income.
My query before the learned members is whether the assessee can apply for rectification u/s 154 of the Act ? If not what is other way to get the benefit under chapter VIA.
Regards
CA Madhu Soodan Tapuriah
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Ramaswami Kalidas
regards
kalidas
Date: Mon, 22 Feb 2010 12:01:02 +0530
From: tapuri...@yahoo.co.in
Subject: Query on Sec 154 of the Income Tax Act
To: eserve...@googlegroups.com
CC: r_ka...@hotmail.com