WHETHER A COMPANY CAN GIVE ITS PROPERTY TO ANOTHER COMPANY AS GIFT & WHETHER SECTION 50C WILL APPLY
Respected Members
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Dive into jurisprudence, watch out today's income tax case law video to get a concise exploration of legal principles and their real-world applications.
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Short note of today's case law for quick reference:
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[2024] 111 ITR (Trib) (S.N.) 47 (ITAT[Ahm])
[BEFORE THE INCOME-TAX APPELLATE TRIBUNAL — AHMEDABAD "C" BENCH]
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GUJARAT INFRAPIPES P. LTD.
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DEPUTY COMMISSIONER OF INCOME-TAX
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1. In 2009, the assessee company acquired from the collectors nine plots of land for industrial purposes.
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2. Due to various financial, administrative and infrastructure problems, the assessee was not able to start its proposed industrial project on these plots.
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3. After obtaining necessary approvals from the competent authority, the plots were gifted to R Ltd, free from all encumbrances and without any consideration, either in cash or kind by executing gift deed dated 29.10.2012.
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4. A.O. applying section 50C, brought to tax as capital gains a sum equal to the market value minus indirect cost of the plots.
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5. CIT(A) deleted the additions, on appeal to ITAT, Tribunal held that:
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6. The transfer of property Act, 1882 considers a company not only as a person but literally speaking as a living person, a person with life.
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7. The same expression “person” in section 5 is transplanted in section 122 of the 1882 Act, which defines a “gift”.
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8. A cogent reading of section 5 and 122 of the 1882 Act makes it clear that a company being a “living person” can transfer property by way of gift to another company.
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9. Further section 122 of the Act does not prescribe any attributes like love and affection.
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10. There are no restrictions in law against a company making a gift of its property to another company.
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11. A transfer without consideration when claimed as a gift is always a gift.
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12.? Further section 47(iii) of the Act, specifically provides that any transfer of a capital asset under a gift is not regarded as a transfer, consequently the question of invoking the provisions of section 50C does not arise.
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13. Grounds of disallowance of Rs 91,956 for prior period expenses, Rs 54,000 for failure to deduct TDS, Rs 60,517 u/s 40A(3) are dismissed without going into merit since the amounts involved were small.