All the forms will incur income tax and stamp duty in transfer.
Transfer of property between sister companies
Company A has a two assets a small factory and a large piece of NA land (100Acres) to build a big factory. Company A has defaulted on its loan and has settled the loan through an OTS, thereby reducing chance of future loans. Company B is formed by the dependents of the directors of Company A. Company B intends to build the factory on the 100 Acre land. All shares of Company A transferred to Company B. Both companies are based in Karnataka. To raise a loan of large magnitude (300 Crs) Banks require the title deeds of the land to be in the name of Company B or its directors. What would be the best way to transfer the land from company A to B incurring the least or no stamp duty. 1.) Dissolving Company A - so assets go to shareholders (will this incur income tax?) 2.) Is it possible to Gift the property from Company A to Company B 3.) Have a joint venture (Financial History of Company A will be known to banks) 4.) Amalgamation/ Merger of both entities with Company B retaining PAN, TAN GST etc. ( Is Stamp Duty Applicable?) 5.) Sale/Transfer of Land from Company A to B at token value to avoid income tax payable by Company B (e.g. Rs. 50/- so only Stamp duty on the transfer is applicable) 6.) Sale deed at Government Value of Land from A to B incurring both Stamp Duty and Income Tax. Kindly advise on the best route possible to avoid reduce Stamp Duty/ Income Tax.
Asked 6 years ago in Business Law
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3 Answers
Since company is an artificial person, it cannot give gifts and hence cannot execute a gift deed.
2) you can have merger of both companies
3) in alternative joint venture between 2 companies
4) if any sale deed is to be executed of land it has to be at the circle rate
1. Even though both the companies are sister concerns, since one company has wound up then its assets can be transferred to the other company by a registered conveyance deed or sale deed.
You may go through the articles of association in this regard.
2. Company A canot gift the property to company B.
Since a company is an artificial person, it cannot claim to get or give love and affection. ... However, there are various status under which a property can be transferred by a company or to a company without monetary consideration. e.g. if it is a section 25 company then it can receive gifts/donations.
3. The banks may insist on it.
4. It depends on the articles of association
5. The income tax will be applicable to the value sold
6. Applicable income tax may have to be paid.
