Fresh issue of shares below fmv- tax implication

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

08 February 2014 If fresh shares are issued by a pvt Ltd company to an individual at a price below FMV.i.e. for inadequate consideration

What will be the tax implication ?

According to me , the difference between the consideration and FMV will NOT be taxable under section 56(2)(vii).
Because on reading the section along with Memorandum to Finace Bill 2010.. it implies that section 56(2)(vii) is applicable only on transfer and not on fresh issue of shares.And will it be taxable under any other section ?

Please can any one provide a judgement supporting the above or any other authenticate clarification with proper source....

If you are against my interpretation, kindly give your view with proper source.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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09 February 2014 well, you are correct in your interpretation. While we do expect AO's to seek some disallowances on such issue of shares. However, the section read with memorandum to finance bill is pretty clear.

One thing you may have to consider is whether deemed dividend can apply to such cases (definitely subject to conditions specified therein)

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