Evading Stamp Duty by purchasing Property through a Company

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  1. Arif Lalani

    Arif Lalani New Member

    Hi friends This is Arif lalani . I have a query which is Mr A is buying a flat but the flat is in the Name of a pvt ltd company so instead of purchasing the flat by the normal way which is buy paying full stamp duty and registering the document Mr A decides to take over the sharesummer of the company in full and become the director of the company to acquirer the fixed asset . Now my question is A) Is this transaction legitimate B)As per the income tax act is it tax planning or evasion of capital gain tax ? C) Is the transaction legitimate as per the ROC D)Does is amount to evasion of stamp duty and registration and creating loss to the got authorise

    Read more at: http://www.caclubindia.com/forum/sale-of-fixed-asset-373171.asp
     
  2. sai tejesh(ca.final)

    sai tejesh(ca.final) Active Member

    I can thoroughly explain your query.

    Say for if Mr.A purchases the said flat from Pvt ltd company at less than the stamp duty value, then the difference amount will be taxable u/s 56(2)(vii).
    Even as you said,instead of purchasing the flat directly, let Mr.A purchase this flat indirectly by purchasing all shares of pvt ltd company,become director and then use this land as usually by him.
    But i can say that here also there is no chance to Mr.A to escape from tax liability on difference between SDV & consideration.Because while purchasing the shares of a pvt ltd company,one shall purchase at Fair Market Value.If not the difference amount will be taxable u/s 56(2)(vii).While calculating the FMV,the SDV of the land will be included on the total assets and obviously it will result into high FMV.

    what i have said above is tax implications and i tried to resolve your doubt.
    Let us come into a practical scenario.Just like that,It is not so easy to acquire all shares of a pvt ltd company.So many formalities he has to comply to acquire all the shares because, as per companies act,shares of a pvt ltd company cannot be not freely transferable.
     
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