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Off Market Deal

santhosh (CA) (636 Points)

03 July 2009

Off Market Deal –

Please analyze the given case and tell me whether there are any adverse ramifications in taxation.

Mr. X is a promoter cum director of ABC Ltd, He sold his house property and has Long term capital Gains of Rs 20Lacs.Now he Transfers Substantial Stake in the company to his wife at substantially Low Price . But this is done off market and no applicability of sec 10(34).Therefore he incurs Huge Long term capital Loss say 12.5 Lacs and wants to Set off LTCL with his Long term capital Gain. Is This Theoretically/practically possible?

Note:The transfer of shares among promoters are not subject to any lock in requirements as per SEBI (investor protection Guidelines).

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2 Replies

Max Payne (employed) (2574 Points)
Replied 03 July 2009

Hmmm.. not covered by 10(38).... it is possible.... LTCL of the current year can be set of agaist LTCG of the current year. However, i would like to draw your attn to section 64(1), if the shares have been transferred for inadequate consideration, then the income derived from these shares, like divedends, would be taxable in the directors hands.

But income on any bonus shares recd by the wife as a result of her holding these shares, will be taxable in her hands...

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CA Vibhor Gupta (CA) (60 Points)
Replied 03 July 2009

yes it is possible subject to that u can justify ur Assessing Officer that why u have sold these shares at this price ( if price is less than market price).