09 December 2010
X Pvt. Ltd. has entered into a development Agreement with Mr. Y under which the development rights over the Company's property were transfered to Mr. Y for say Rs. 5 Crores.
X Pvt. Ltd. filed a self assessment Return with Income Tax Deptt. reflecting the capital gain tax payable on the consideration receivable in the said A.Y.
Latter on Mr. Y defaulted in payment of consideration in full. X Pvt. Ltd. cancelled the developmant Agreement.
IT Deptt. issued a notice to X for the payment of Self Assessmant Tax to which X replied that since the transaction over which the capital gains tax was charged is cancelled, the company is not liable to pay the tax but the liability is with Mr. Y.
Pl guide in this regard about whio is actually liable to pay the Tax - X Pvt. Ltd or Mr. Y. Pl quote the Applicable sections / Provisiona of Income Tax Act.
10 December 2010
As X Ltd has crystallized tax liability by showing Capital Gains Tax Payable ( S A Tax not paid) on transfer of Development Rights to Y, department has validly raised the demand. X Ltd. has not exercised proper care in dealing with the issue. It has got 6 more months after the financial year end during which the agreement was entered into. The matter must have been brought into the notice of the management by the auditors also. No body transfers any right without receiving a sizable part of the consideration.
In all the above circumstances X ltd can not deny its liability to pay tax on the grounds cited in query.
The point of Y's Liability is not undertood by me. How it has shifted to Y?
CAclubindia
