Is transfer is applicable in exch of gala for conveyance pur

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Querist : Anonymous

Querist : Anonymous (Querist)

05 April 2013 We have currently exchanged commercial units to our nearest neighbor for the our conveyance of our existing office. We have possessed Gala no 8 & 10. We have exchanged Gala no 10 and got exchanged & how having Gala no 9. So now it is easy for our conveyance to access Gala no.9.with 8 Is this transaction called transfer u/s 2(47) of Income tax Act 1961.

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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27 May 2013 Yes this a transfer for both of you and for this you have to prepare a deed of exchange and pay the stamp duty accordinlgy

Querist : Anonymous

Querist : Anonymous (Querist)

08 June 2013 kindly explain in detail.

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Querist : Anonymous

Querist : Anonymous (Querist)

08 June 2013 professional fees paid for exchange of industrial shed can capitalised the cost of acquisition? kindly provide the supporting.

Querist : Anonymous

Querist : Anonymous (Querist)

08 June 2013 here the both industrial unit will be same in the building, same floor and same in sq ft , no consideration is given, is then called the transfer case? pl support with section

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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01 August 2024 In the context of the Income Tax Act, 1961, the term "transfer" under Section 2(47) is pivotal in understanding the implications of property transactions, including exchanges. Here’s a detailed explanation based on your scenario:

### **1. Understanding Transfer Under Section 2(47)**

**A. Definition of Transfer:**
- **Section 2(47) of the Income Tax Act, 1961** defines "transfer" with respect to capital assets. It includes:
- Sale, exchange, or relinquishment of the asset.
- Extinguishment of rights in the asset.
- Transfer of rights or interests in the asset by way of contract or otherwise.

**B. Exchange of Properties:**
- The exchange of commercial units, such as your scenario where you exchanged Gala No. 10 for Gala No. 9, is considered a transfer under Section 2(47) because it involves the exchange of one capital asset for another.

### **2. Treatment of Exchange Transactions**

**A. Nature of Exchange:**
- Since you are exchanging one commercial unit (Gala No. 10) for another (Gala No. 9), this transaction is treated as a transfer.
- The transaction does not involve a monetary consideration but is still considered a transfer for tax purposes.

**B. Valuation and Tax Implications:**
- **Fair Market Value (FMV):** Even if no money changes hands, both properties need to be valued at their fair market value at the time of the exchange.
- **Capital Gains:** If there is a difference between the fair market value of the properties exchanged, it could lead to a capital gain or loss, which needs to be reported.
- **Cost of Acquisition:** The cost of acquisition of the new property will be the fair market value of the property received in exchange.

### **3. Professional Fees and Capitalization**

**A. Professional Fees:**
- Fees paid for legal or professional services related to the exchange of industrial sheds are generally considered part of the cost of acquisition or improvement.
- **Capitalization:** These fees can be capitalized to the cost of the asset, and they should be included in the cost of the asset for purposes of calculating depreciation or capital gains.

### **4. Specific Sections and Rules**

**A. Sections to Consider:**
- **Section 45:** Deals with the capital gains arising from the transfer of capital assets.
- **Section 48:** Outlines the mode of computation of capital gains, including the cost of acquisition and improvements.
- **Section 50C:** If applicable, deals with the deemed value of assets in case of transfers involving immovable property.

**B. Supporting Guidance:**
- **Income Tax Rules:** Refer to the Income Tax Rules for specifics on how to handle the valuation and reporting of capital gains.
- **Judicial Precedents:** Court decisions can provide further clarity on specific situations involving exchanges and transfers.

### **5. Practical Considerations**

**A. Documentation:**
- Maintain detailed documentation of the exchange transaction, including valuation reports, legal agreements, and any professional fees incurred.

**B. Reporting:**
- Ensure proper reporting of the transaction in your income tax returns, including any capital gains or losses arising from the exchange.

**C. Professional Advice:**
- Given the complexity of property transactions and tax implications, consider consulting with a tax professional or legal advisor to ensure compliance with all applicable tax laws and regulations.

In summary, your exchange of commercial units is considered a transfer under Section 2(47) of the Income Tax Act, 1961. Professional fees related to the exchange can be capitalized as part of the cost of acquisition. It is crucial to value the properties correctly and report the transaction accurately for tax purposes.