Sec. 56

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C.A.AVANI K. GADA (Querist)

26 January 2011 If a Company issues bonus shares, then whether Sec.56(2)(viia) will be applicable??

Is any tax planning avenues available??

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)

26 January 2011 As per explanation (d)(ii) to section 56 (2) (vii)(c) ,property includes shares and securities. So if the value of bonus shares exceeds Rs.50,000/- tax liability arises under the section referrred above and not under sub clause (vii)(a).

Guest

Guest (Expert)

28 January 2011 Agree with Mr. Warrier

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

28 January 2011 I would like to invite response from the experts and appreciate their comments on the matter of tax planning avenue also.

If bonus shares are issued on the shares held as stock in trade, then the provisions of Section 56 (2) (vii)(c) will not be applicable as the asset held by the assessee will not be a capital asset in that case.

So, if shares can be shown as stock in trade, even on receipt of bonus shares having market value above Rs 50000/- will not attract Section 56 (2) (vii)(c)provisions.

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