Can a residence be gifted to a company?
Clarity on issues and concerns related to real estate, laws and taxes
I have a family-owned private limited company. Can we gift an immovable property to such a company? All the shareholders of the company are my family members.
Gift entails a contract under the provisions of the Indian Contract Act 1872. Natural love and affection is one of the main ingredients of a gift and the gift of an immovable property requires compliance with relevant provisions of Transfer of the Property Act, 1882 as well as the provisions of the Registration Act, 1908.
The Contract Act provides that there cannot be a valid contract without consideration except when the consideration is natural love and affection. Natural love and affection is not possible towards an artificial juridical person. Under the Transfer of Property Act, 1882, it is provided that the gift has to be accepted by the donee before the donee dies. The term "dies" cannot be used with reference to a company. For the purposes of income tax law also a genuine gift would have to be based inter alia on natural love and affection.
On consideration of above legal aspects, you cannot make gift of an immovable property to a company.
My husband died leaving me as the nominee in respect of the flat in a co-operative housing society. The flat was purchased by my husband in the year 1979. My husband also left a will bequeathing the said flat to myself as well as my two children in equal proportions. The society is asking for probate of the will and is not transferring the share certificate in my name. We are planning to sell the flat. What will be the income tax implications of sale?
Once a member dies, the society is to verify whether the member has left a valid nomination or not. The society does not have to go into the aspects of will and probate. However, you may note that even after the society transmits the share certificate in your name, you do not become owner of the flat or the shares. As a nominated member you are only the trustee of the true legal heirs or the legatees under the Will of the deceased member.
On sale of the flat, capital gains will arise in the hands of all the three heirs being the co-owners of the flat. For the purpose of computation of capital gains although apparently there is no cost of acquisition to you but under the income tax law, the cost of acquisition of the flat in the hands of your deceased husband will be the cost of acquisition of each of the co-owners proportionately.
In your hands, the resultant capital gains will be the long term capital gains because your period of holding will be construed from 1979 onwards. You will be entitled to, at your option, substitution of Fair Market Value of the flat as on 01 04 1981 in place of cost of acquisition of the flat. You will also get indexation benefits from 01 04 1981 onwards in respect of the cost of acquisition till that date and in respect of cost of improvement incurred after that date.
Clarity on issues and concerns related to real estate, laws and taxes
I have a family-owned private limited company. Can we gift an immovable property to such a company? All the shareholders of the company are my family members.
Gift entails a contract under the provisions of the Indian Contract Act 1872. Natural love and affection is one of the main ingredients of a gift and the gift of an immovable property requires compliance with relevant provisions of Transfer of the Property Act, 1882 as well as the provisions of the Registration Act, 1908.
The Contract Act provides that there cannot be a valid contract without consideration except when the consideration is natural love and affection. Natural love and affection is not possible towards an artificial juridical person. Under the Transfer of Property Act, 1882, it is provided that the gift has to be accepted by the donee before the donee dies. The term "dies" cannot be used with reference to a company. For the purposes of income tax law also a genuine gift would have to be based inter alia on natural love and affection.
On consideration of above legal aspects, you cannot make gift of an immovable property to a company.
My husband died leaving me as the nominee in respect of the flat in a co-operative housing society. The flat was purchased by my husband in the year 1979. My husband also left a will bequeathing the said flat to myself as well as my two children in equal proportions. The society is asking for probate of the will and is not transferring the share certificate in my name. We are planning to sell the flat. What will be the income tax implications of sale?
Once a member dies, the society is to verify whether the member has left a valid nomination or not. The society does not have to go into the aspects of will and probate. However, you may note that even after the society transmits the share certificate in your name, you do not become owner of the flat or the shares. As a nominated member you are only the trustee of the true legal heirs or the legatees under the Will of the deceased member.
On sale of the flat, capital gains will arise in the hands of all the three heirs being the co-owners of the flat. For the purpose of computation of capital gains although apparently there is no cost of acquisition to you but under the income tax law, the cost of acquisition of the flat in the hands of your deceased husband will be the cost of acquisition of each of the co-owners proportionately.
In your hands, the resultant capital gains will be the long term capital gains because your period of holding will be construed from 1979 onwards. You will be entitled to, at your option, substitution of Fair Market Value of the flat as on 01 04 1981 in place of cost of acquisition of the flat. You will also get indexation benefits from 01 04 1981 onwards in respect of the cost of acquisition till that date and in respect of cost of improvement incurred after that date.
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