Can pvt ltd comany make gift ?

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J. N. Trivedi (Querist)

08 December 2017 Can a Indian pvt ltd company gift shares held by it of other company to any individual or any other entity ?
If yes, tax wht r applications on Donor & donee ?

Anand

Anand (Expert)

08 December 2017 Yes, in my opinion, a company can give a gift. You may want to check the Articles of Association of the company to ascertain whether the company is permitted to do so. Furthermore, please also check the companies act. I am not too sure about that aspect.

From a taxation perspective
a) As per Section 47(iii) any transfer of a capital asset under a gift or will or an irrevocable trust is not considered a "transfer" for the purpose of capital gains. Hence there will be no Capital Gains in the hands of the transferor/Donor company.

b) In the hands of the donee, we have to refer to the provisions of Section 56(2)(x) which states that where any person receives any previous year on or after the first day of April 2017,any property other than immovable property, (this includes shares) without consideration, the aggregate fair market value of which exceeds Rs. 50,000/-, then the whole of the aggregate fair market value of such property is taxable as Income from Other Sources in the hands of the Donee.
The FMV is to be worked out in accordance with the provisions of Rule 11U and Rule 11UA. in case of Shares and Securities Rule 11UA(1)(c) is applicable. The FMV of quoted shares will be the lowest price of such shares quoted on any recognised stock exchange on the date on which the shares are received by the donee.
If the shares are unquoted, then the formula is given in 11uA(1)(c)(b) and 11UA(2).

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