Sale of land to a holding company exempt from capital gains tax: Madras HC

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The Madras High Court ruled that the appraised was entitled to an exemption under Section 47 (v) of the Income Tax Act in respect of the transfer of land to its holding company.

The appraised, M / s. Hardlow India Ltd. is a public limited company, filed the income tax return for the tax year in question, returning “NIL” income. The statement was processed under subsection 143 (1) of the Act and later the assessment officer performed the regular assessment.

The appraisal was reopened by issuing a notice under section 148 of the Act on the grounds that the appraised transferred part of his land in Sembium to his holding company, namely M / s. Simpson & Co . Ltd., for a consideration of Rs. 375 lakhs resulting in a profit on the sale of the asset and the same, was not proposed for tax under the heading “capital gains” against the valued at on the grounds that the assessed company is a 100% subsidiary of M / s. Simpson & Co. Ltd. with reference to section 47 (v) of the Act.

The appraiser found that 25 shares of the valued company out of 80 lakhs shares were held by the candidates of the holding company, namely M / s Simposon & Co. Ltd. capital gains in accordance with the provisions of section 47 (v) of the Act.

The assessed person appealed to CIT (A), which, by order, dismissed it. Affected by this, the appraised appealed to the Tribunal, in which it was held that the appraised was entitled to an exemption under section 47 (v) with respect to the transfer of land to Mr. /s.Simpson & Co. Ltd.

Article 47 (v) of the law stipulates that nothing in article 45 of the law applies to any transfer of a fixed asset by a subsidiary to the holding company if the entire share capital of the subsidiary is owned by the holding company, and the holding company is an Indian company. The fact that the company is an Indian company is not in dispute.

Revenue argued that the distinction has been made clear by reading Article 47 (iv) and Article 47 (v) of the Act and it is clear that the word “nominees” is not present in article (v) to article 47 of the Law and, consequently, the contention advanced by the person assessed does not merit being accepted.

The two-judge bench of Judge TSSivagnanam and V. Bhavani Subbaroyan, while upholding the court’s decision, held that the appraised, Mr / s. Hardlow India Ltd. the transfer of land to its holding company, namely M / s. Simpson & Co. Ltd.

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