Treatment in books for buying and selling of investment

Shweta Punmia (CA) (190 Points)

09 April 2024  

Suppose an Entity X buys shares of a private ltd company ( from existing share holder) at 70, the fair market value of the shares is 100.

 

There is tax implications on differnce 30 and entity X pays the tax say Rs 10.

 

1. What willl be the treatment of tax paid in books of account under AS regime ? Can it be capitalised as part of investment ?

 

2. When in future this is sold, what will be cost of acquistion for the purpose of calculating Capital gains under Income tax Act? 70 or 100 ?

 

3. Any other related matter you would like to draw attention to as an auditor ?

 

4. Will the answer differ if entity X is an LLP or partnership firm ?

 

TIA