A Ltd. is 100% holding company of B Ltd. A Ltd. transfers a capital asset (acquired in 2003 for ₹ 50,000) on 16.06.2020 for ₹ 3,70,000 to B Ltd. B Ltd. is an Indian company, while A Ltd. is a foreign company. The capital asset is transferred as stock-in-trade to B Ltd. Determine whether any capital gains shall be chargeable to tax in the instant case?
A. Any transfer between a holding company and 100% subsidiary company is not treated as a transfer at all. Hence, no capital gains tax liability shall arise.
B. Any transfer between a holding company and 100% subsidiary company is not treated as a transfer if the transferee company is an Indian company. Hence, no capital gains tax liability shall arise.
C. A transfer between a holding company and 100% subsidiary company is treated as a “transfer” as there is no specific exclusion in this regard. Hence, capital gains tax liability shall arise.
D. Any transfer between a holding company and 100% subsidiary company is not treated as a transfer if the transferee company is an Indian company. However, this rule is not applicable if the capital asset is transferred as stock-in-trade. Hence, capital gains tax liability shall arise.
Answer:D
A Ltd. is 100% holding company of B Ltd. A Ltd. transfers a capital asset (acquired in 2003 for ₹ 50,000) on 16.06.2020 for ₹ 3,70,000 to B Ltd. B Ltd. is an Indian company, while A Ltd. is a foreign company. The capital asset is transferred as stock-in-trade to B Ltd. Determine whether any capital gains shall be chargeable to tax in the instant case?
A. Any transfer between a holding company and 100% subsidiary company is not treated as a transfer at all. Hence, no capital gains tax liability shall arise. B. Any transfer between a holding company and 100% subsidiary company is not treated as a transfer if the transferee company is an Indian company. Hence, no capital gains tax liability shall arise. C. A transfer between a holding company and 100% subsidiary company is treated as a “transfer” as there is no specific exclusion in this regard. Hence, capital gains tax liability shall arise. D. Any transfer between a holding company and 100% subsidiary company is not treated as a transfer if the transferee company is an Indian company. However, this rule is not applicable if the capital asset is transferred as stock-in-trade. Hence, capital gains tax liability shall arise.