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Transfer of capital asset by shareholder to company

Tax planning 707 views 1 replies

shehzad

accounts executive

140 Points Posted on 02 July 2009

Dear Sir,
Mr. A is a registered owner of land. He is also a shareholder in company B. Company B wants to build a mall on that land.
My query is:
1) If Mr. A sells land to Company B, then it will be taxed as LTCG. Neither company nor Mr. A wants to pay tax.
2) If Mr. A gives that land on lease to company B & than company B builds mall on that land. Whether any provisions of Income Tax or Companies Act are violated. If not what are the other points to be kept in mind.

If u have any other way than please suggest.
Please reply ASAP.
Thanks

Replies (1)

MAYANK GUGLANI

124 Points Posted on 02 July 2009

HII SHEZAD

AS PER OF YOUR 1ST QUERY

(A) IF LAND IS WITH MR.A FOR 3 OR MORE THAN 3YEARS THEN LTCG WILL BE PPLIED AND TAS ACCORDING TO THAT WILL HAVE TO BE PAID BY MR.A @ 20%+ED.CESS+SHEC+

(B) IF LESS THAN 3YEARS THEN STCG @ 15%+ED.CESS+SHEC

AS PER YOUR SECOND QUERY THERE IS NO VIOLATION AS PER INCOME TAX ACT BUT THERE CAN BE VIOLATION IF MR.A HAS A SUBSTANTIAL INTEREST (20% OF SHARE CAPITAL) IN THE COMPANY,THEN MR. A WILL BE RELATED PARTY TO THAT COMPANY SO LEASE WITH COMPANY WILL BE VIOLATED