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TAX ADVOCATES’ ASSOCIATION, GUJARAT

ISSUES IN PROVISIONS OF SECTIONS 50C AND 56(2) OF THE INCOME


TAX ACT, 1961

ON JANUARY 31, 2010

♦ Presentation by :
♦ CA. TARUN GHIA
♦ tarunghiaca@yahoo.co.in
♦ tarunghiadirtaxes-subscribe@yahoogroups.co.in
♦ 9821345687

CA. Tarun Ghia


I. Section 50C :
♦ Validity upheld

♦ History and Background

♦ Chapter XXA: 15 11 1972 to 30 09 1986

♦ XXA proceedings started after transfer

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♦ Acquisition of immovable property
based on Fair Market Value

♦ K. P. Varghese 131 ITR 597 (SC)

♦ XXC : 01 10 1986 to 30 06 2002

♦ Pre-emptive right to purchase by Govt. in


notified cities and towns

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♦ Based on monetary limits of apparent
consideration

♦ Limited application and was failing

♦ Finance Act, 2002 introduced 50C w.e.f. 01 04


2003

♦ Simultaneously Chapter XXC made inoperative


w.e.f. 01 07 2002

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♦ Overlapping transactions

♦ Extends to entire country except J & K

♦ Transactions in land and building or both

♦ Held as capital assets

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♦ Consideration stated in instrument of transfer
vis a vis
value adopted and assessed or assessable by
stamp duty authorities

♦ “Assessable” inserted w.e.f. 01 10 2009

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♦ Relief Provisions :
Appeal, Revision or Reference before other
authority or court
Claim of lesser Fair Valuation before AO
“May” refer to Departmental Valuation Officer

♦ Valuation Proceedings

♦ Valuation Report

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♦ Value determined: Higher/ Lower

♦ Valuation Report received after completion of


assessment

♦ Coverage of term “land or building or both” :

♦ Flats, shops, galas and other such units

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♦ Units in co-operative hsg. society or other
such organisations

♦ Development rights

♦ Tenancy rights

♦ Booking right in a unit

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♦ For Builders and developers

♦ Stamp duty paid by Purchaser : Locus of Vendor

♦ Can sec. 50C be applied to purchaser ?

♦ Effect on exemption provisions

♦ Section 50C vis a vis sections : 45(2), 45(3), 45(4),


50, 50B

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II. Section 56(2) :
♦ Abolition of Gift Tax Act, 1958 in 1998

♦ Due to very poor collection under that Act

♦ Proposal to include gifts in the Income Tax Act

♦ Gifts in the hands of donee

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♦ Continuing exemption to gifts from Non residents

♦ Proposal was not enacted

♦ Gifts became tax free

♦ Introduced by Finance (No.2) Act, 2004

♦ By insertion of clause (v) in section 56 (2) and


(xiii) in 2(24)

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♦ Limit per donor Rs.25000 per previous year

♦ No provision about aggregation of such gifts

♦ Taxation Amendment Act, 2006 inserted clause


(vi) for aggregation

♦ Gifts received on or after 01 04 2006

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♦ if aggregate in a previous year exceeds
Rs.50000/-

♦ then such gifts are income

♦ Position prior to Finance (No.2) Act, 2009:

♦ Receipts without consideration by Individual or


HUF

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♦ Can a company receive gift ?

♦ Sum of money : connotation

♦ from non –relatives taxable

♦ Gifts from relatives not taxable ?

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♦ Exceptions:
From relatives
On occasion of marriage
Under a will or by inheritance
In contemplation of death of payer
From local authority ref sec 10(20)
Institution etc. registered u/s. 10(23C)

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Trust or institution registered u/s. 12AA

Relatives of an individual : Spouse, brother,


sister, brother or sister of the spouse,
brother or sister of either of the parents,
lineal ascendants or descendants, lineal
ascendants or descendants of the spouse,
spouse of any such specified relative.

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♦ Substantial amendments w.e.f. 01 10 2009:

♦ Immovable properties without consideration

♦ or for inadequate consideration

♦ Stamp Valuation exceeding Rs. 50000/-


or stamp value exceeding stated
consideration by Rs.50000/-

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♦ Per immovable property

♦ Assessee can dispute stamp valuation

♦ Sec 49(4): When assessee charged to tax


u/s. 56(2)(vii) : ref. Property
Diff. will be added to cost of acquisition u/s.
48

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♦ Property other than immovable property :
Shares and securities, jewellery, archaeological
collections, drawings, paintings, sculptures, any
work of art

♦ Taxable in the like manner but


w.r.t. fair market value

♦ whole of aggregate value of such property

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♦ Method of fair valuation to be prescribed

♦ W.e.f. A.Y. 2010-11 interest received on


compensation
or enhanced compensation ref. Sec. 145A(b)

♦ taxable in year of receipt

♦ Sec 57 : Deduction of 50% of such interest income

Thank you : tarunghiaca@yahoo.co.in


CA. Tarun Ghia