CA. Tarun Ghia

AHMEDABAD TAX PRACTITIONERS’ ASSOCIATION

ISSUES IN PROVISIONS OF SECTIONS 50C AND 56(2) OF THE INCOME TAX ACT, 1961

ON JANUARY 31, 2010

Presentation by : CA. TARUN GHIA tarunghiaca@yahoo.co.in tarunghiadirtaxes-subscribe@yahoogroups.co.in 9821345687

CA. Tarun Ghia

I. Section 50C :

Validity upheld

History and Background

  Chapter XXA: 15 11 1972 to 30 09 1986

  XXA proceedings started after transfer

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Acquisition of immovable property

based on Fair Market Value

K. P. Varghese 131 ITR 597 (SC)

  XXC : 01 10 1986 to 30 06 2002

  Pre-emptive right to purchase by Govt. in

notified cities and towns

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Based on monetary limits of apparent consideration

  Limited application and was failing

  Finance Act, 2002 introduced 50C w.e.f. 01

04 2003

  Simultaneously Chapter XXC made

inoperative w.e.f. 01 07 2002

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Overlapping transactions  

Extends to entire country except J & K

  Transactions in land and building or both

  Held as capital assets

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Consideration stated in instrument of transfer

vis a vis

value adopted and assessed or assessable by

stamp duty authorities

“Assessable” inserted w.e.f. 01 10 2009

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Relief Provisions :

Appeal, Revision or Reference before other authority or court

Claim of lesser Fair Valuation before AO

“May” refer to Departmental Valuation Officer

  Valuation Proceedings

Valuation Report

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Value determined: Higher/ Lower

  Valuation Report received after completion

of assessment

  Coverage of term “land or building or both” :

Flats, shops, galas and other such units

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Units in co-operative hsg. society or other such organisations

Development rights

  Tenancy rights

  Booking right in a unit

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For Builders and developers

  Stamp duty paid by Purchaser : Locus of

Vendor

  Can sec. 50C be applied to purchaser ?

Effect on exemption provisions

Section 50C vis a vis sections : 45(2), 45(3), 45(4), 50, 50B

CA. Tarun Ghia

II. Section 56(2) :

Abolition of Gift Tax Act, 1958 in 1998

  Due to very poor collection under that Act

  Proposal to include gifts in the Income Tax

Act

  Gifts in the hands of donee

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Continuing exemption to gifts from Non residents

Proposal was not enacted

  Gifts became tax free

  Introduced by Finance (No.2) Act, 2004

  By insertion of clause (v) in section 56 (2) and

(xiii) in 2(24)

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Limit per donor Rs.25000 per previous year

  No provision about aggregation of such

gifts

  Taxation Amendment Act, 2006 inserted

clause (vi) for aggregation

  Gifts received on or after 01 04 2006

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if aggregate in a previous year exceeds Rs.50000/-  

then such gifts are income

Position prior to Finance (No.2) Act, 2009:

  Receipts without consideration by

Individual or HUF

 

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Can a company receive gift ?

  Sum of money : connotation

  from non –relatives taxable

  Gifts from relatives not taxable ?

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Exceptions:

From relatives

On occasion of marriage

Under a will or by inheritance

In contemplation of death of payer

From local authority ref sec 10(20)

Institution etc. registered u/s. 10(23C)

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Trust or institution registered u/s. 12AA

Relatives of an individual : Spouse, brother, sister, brother or sister of the spouse, brother or sister of either of the parents, lineal ascendants or descendants, lineal ascendants or descendants of the spouse, spouse of any such specified relative.

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Substantial amendments w.e.f. 01 10 2009:

Immovable properties without consideration

or for inadequate consideration

Stamp Valuation exceeding Rs. 50000/-

or stamp value exceeding stated

consideration by Rs.50000/-

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Per immovable property

  Assessee can dispute stamp valuation

  Sec 49(4): When assessee charged to tax

u/s. 56(2)(vii) : ref. Property

Diff. will be added to cost of acquisition u/s. 48

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Property other than immovable property :

Shares and securities, jewellery, archaeological collections, drawings, paintings, sculptures, any work of art

  Taxable in the like manner but

w.r.t. fair market value

whole of aggregate value of such property

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Method of fair valuation to be prescribed

  W.e.f. A.Y. 2010-11 interest received on

compensation

or enhanced compensation ref. Sec. 145A(b)

  taxable in year of receipt

  Sec 57 : Deduction of 50% of such interest income

Thank you : tarunghiaca@yahoo.co.in