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June 29 To July 5, 2019 u Taxmann’s Corporate Professionals Today u Vol. 45 u 11pain sort of thing for the department. Timely
compliance by the taxpayer should be put into
practice. It can be achieved if no extended
time is allowed for depositing the unutilized
capital gains in the capital gain account
scheme.
- Sales consideration as per Sec. 50C
is not relevant to compute exemption
under Section 54F/54/54EC
Section 50C of the Income-tax Act was introduced
with effect from April 1, 2003 by the Finance
Act, 2002 to make a special provision for
determining the full value of consideration in
cases of transfer of immovable property. It has
been disputed in the recent past whether such
deeming fiction under Section 50C would be
considered while computing deduction under
Sections 54 and 54F. For instance, if actual sales
consideration is 40 lakhs but deemed sales consideration by virtue of Section 50C is 50
lakhs, whether for exemption under Section
54 or 54F, the actual sales consideration shall
be taken into the account or the deemed sales
consideration.
The Supreme Court in the case of Apollo Tyres
Ltd. v. CIT [2002] 122 Taxman 562 held that
deeming provision should be applied for the
purpose for which the said deeming provision
is specifically enacted. The Supreme Court in
the case of CIT v. Mother India Refrigeration
Industries (P.) Ltd. [1985] 23 Taxman 8 held that
legal fiction cannot be extended beyond its
legitimate field and will have to be confined
to that purpose.
Recently, the Bombay High Court in the
case of Jagdish C. Dhabalia v. ITO [2019] 104
taxmann.com 208 held that Section 50C was
introduced in the Income-tax Act with a
deeming fiction which cannot be extended to
another provision. Therefore, while computing
exemption under section 54 of the Act,
actual sale consideration has to be taken
into consideration and not stamp duty value
computed under section 50C of the Act.
Thus, it is suggested that suitable Explanation
may be added to section 50C of the Act
that exemption under section 54/54F shall
be computed in reference to actual sales
consideration and no regard shall be given
to the deemed consideration computed in
accordance with section 50C.- Taxability of Goodwill received by
retiring partner
As per the provision of section 45(4), profits
or gains arising from transfer of capital
asset by way of distribution of capital asset
on dissolution of firm or otherwise shall be
chargeable to tax as income of the firm. For
the application of this provision, transfer of
capital asset is necessary.
Therefore, in cases where goodwill was
evaluated and the retiring partners were paid
certain sum for their share of goodwill in
proportion to their share in partnership, no
capital gain arose in hands of partnership firm.
We have recently witnessed the Bombay
High Court’s ruling in case of PCIT v. R.F.
Nangrani HUF [2018] 93 taxmann.com 302
wherein it was held that amount received
by retiring partner from firm on account
of goodwill will not be subjected to tax as
capital gains in his hands.
As can be seen, the amount of goodwill
remains untaxed in hands of Firm as well in
the hands of retiring partner. It is expected
that Union Budget might bring clarity with
regards to taxability of goodwill paid to
retiring partners. - Disallowance of expenses for non-
deduction of tax in case of non-residents
by trusts
The Finance Act, 2018 has provided that
trusts or institutions will also be required to
follow the provisions of TDS and will make
EXPECTATIONS FROM AND RECOMMENDATIONS FOR UNION BUDGET 2019