Revenue recognition on sale of shares

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Querist : Anonymous

Querist : Anonymous (Querist)

17 January 2014 Hi experts, I have a doubt regarding revenue recognition in sale of shares. When should we can recognise the income on sale of shares, we have shares in Private limited,we sold those shares to the promoters.
We have received full consideration, but share tranfer procedures are pending. To recognise income is it nessasary to get the shares registered in the name of transferee?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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18 January 2014 till date the shares are not transferred to the other person, you shall continue to be the sahreholder. It is appropriate to park the money till then as advance received. Such treatment shall also be compliant with tax as the capital gains will trigger only upon transfer of shares.

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Querist : Anonymous

Querist : Anonymous (Querist)

18 January 2014 Thank you Nikhil for your reply,

Can u please provide any reference or case law.

As i feel it is only a technical aspect(registering in the name of tranferee),substantially the transaction is completed.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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18 January 2014 Dear Dileep,

Without effecting the transfer of shares, you will continue to be the shareholder for official purposes.

unlike trading on stock exchange, where you may account for the sale on the day your sale order gets executed on the exchange, in case of sale of shares off-market, would substantially require that you take steps to transfer the title of shares without which the receipt would only account for as a capital receipt in advance..

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