Capital gain tax

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Umesh Dhara (Querist)

09 June 2016 Any body please help me on following query:

Company A & B
Net Worth 500000 , 100000 respectively
No of share 4500 , 1500 respectively
Fair market value per share 111.1 , 66.7 respectively

1. Company A is purchasing company B for a consideration of Rs. 55555

2. Share exchange ratio 1:3 i.e. for every 3 share of B 1 share to be issued to B from A

3. So no of share to be issued to B from A = 500 (i.e. 1500/3)

4. Now share holder of B want to take from A 350 no of share and for rest 150 (i.e. 500-350) share they want to take cash @ 111.1 each

5. So as per income tax provision capital gain tax will be imposed in the hand of B on amount of (Rs.111.1*150 - cost of acquisition) at the rate of 20.06%

So my question is that how "cost of indexation" will be calculated if cost of per share at the time of investment in B is Rs. 10 in the year 2005-06

Thanks in advance
Regards,
Umesh Dhara

CA SUNIL K GARG

CA SUNIL K GARG (Expert)

11 June 2016 Indexed cost of acquisition of shares will be calculated as per section 55 of Income Tax Act, 1961 by considering the index rate of 2005-06.

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