This applies to groups of companies, the general rules about appropriations to and from stock in trade which are contained in the Capital Gains Tax Act, 1975.
SECTION 131.
Question proposed: " That section 131 stand part of the Bill."
This is other than trading stock?
No, it is dealing with trading stock and the nature of assets in different companies. For instance, where a group company transfers an asset which is not part of its trading stock to another group company in whose hands it is trading stock, the transferor will be regarded as having made neither a gain nor a loss on the disposal. The transferee will be treated as having acquired it at the price at which the transferor acquired it, and as having immediately disposed of it at market value and as having thereby made a capital gain or loss. However, the transferee company has the option of bringing the asset into its trading account at its cost to the transferor company. The profit or loss when the transferee company disposes of the asset in the course of its trade would then be a trading profit or loss.
In the converse situation, where a member company transfers an asset out of its trading stock to another member of the group, and that other company acquires it otherwise than as trading stock, the transferor company is to be treated as having appropriated the asset for some purpose other than use as trading stock immediately before the transfer and, therefore, as having acquired it at that time for a consideration equal to the amount brought into its accounts for tax purposes. The effect of this is that the asset will be treated for tax purposes as having been acquired by the transferee company at the price at which the asset was credited in the books of the transferor company.
Question put and agreed to.