If a director lease land to pvt ltd company for use of business for 25 years at token rent of rs. 1 and in consideration pvt ltd company pays one time Refundable deposit of say Rs. 5 crore to director against land value of say rs. 20 crore.
1) Is it liable to Capital Gain Tax? 2) Is Director required to show rent income at market rate in his tax return and not rs. 1?
06 October 2013
Deposits cannot be treated as sale as you have not executed any sale deed.
The rent is to be taken at market value only when there is comparable cases that the nearby land has been leased for more than Re.1. Moreover the advance received by the director is earning come and on that he is paying taxes.
Kindly note that the provision of section 297, 301 etc. of the companies act will also attract.
CAclubindia
