Cost of Transfer (Capital Gains)

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  1. Planets_su

    Planets_su New Member

    Can I be explained what consists "cost of transfer"?

    Final settlement paid to employees due to jobs termination for factory sale,
    TDS U/s 194LA
    Factory supervision costs or scrap values

    Does the above constitute cost of transfer (in case of factory sale)?
     
  2. ZED

    ZED Well-Known Member

    Your query is not clear, are you asking in respect of S.48? If, then not. Cost of transfer would include those expenses which are incurred directly for the purpose of transfer. Such expense include brokerage or legal fees.

    TDS is not an expense.

    How is factory being sold? As a slump sale?
    If so then provisions of S.48 (which refers to cost of transfer) are not applicable.


    50B. (1) Any profits or gains arising from the slump sale effected in the previous year shall be chargeable to income-tax as capital gains arising from the transfer of long-term capital assets and shall be deemed to be the income of the previous year in which the transfer took place :

    Provided that any profits or gains arising from the transfer under the slump sale of any capital asset being one or more undertakings owned and held by an assessee for not more than thirty-six months immediately preceding the date of its transfer shall be deemed to be the capital gains arising from the transfer of short-term capital assets.

    (2) In relation to capital assets being an undertaking or division transferred by way of such sale, the "net worth" of the undertaking or the division, as the case may be, shall be deemed to be the cost of acquisition and the cost of improvement for the purposes of sections 48 and 49 and no regard shall be given to the provisions contained in the second proviso to section 48.

    (3) Every assessee, in the case of slump sale, shall furnish in the prescribed form along with the return of income, a report of an accountant as defined in the Explanation below sub-section (2) of section 288, indicating the computation of the net worth of the undertaking or division, as the case may be, and certifying that the net worth of the undertaking or division, as the case may be, has been correctly arrived at in accordance with the provisions of this section.

    Explanation 1.—For the purposes of this section, "net worth" shall be the aggregate value of total assets of the undertaking or division as reduced by the value of liabilities of such undertaking or division as appearing in its books of account :

    Provided that any change in the value of assets on account of revaluation of assets shall be ignored for the purposes of computing the net worth.

    Explanation 2.—For computing the net worth, the aggregate value of total assets shall be,—

    (a) in the case of depreciable assets, the written down value of the block of assets determined in accordance with the provisions contained in sub-item (C) of item (i) of sub-clause (c) of clause (6) of section 43;

    (b) in the case of capital assets in respect of which the whole of the expenditure has been allowed or is allowable as a deduction under section 35AD, nil; and

    (c) in the case of other assets, the book value of such assets.
     
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