tax advocates’ association, gujarat

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CA. Tarun Ghia

TAX ADVOCATES ASSOCIATION, GUJARAT

ISSUES IN PROVISIONS OF SECTIONS 50C AND 56(2) OF THE INCOME

TAX ACT, 1961

ON JANUARY 31, 2010

Presentation by : CA. TARUN GHIA [email protected] [email protected]

9821345687
mailto:[email protected]:[email protected]


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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. innotified 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 otherauthority 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


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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 inheritanceIn 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 statedconsideration by Rs.50000/-


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Per immovable property

Assessee can dispute stamp valuation

Sec 49(4): When assessee charged to taxu/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, archaeologicalcollections, 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 : [email protected]

tax advocates’ association, gujarat

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