section 46 related

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ANIL RAMDURG (Querist)

23 May 2011 at the time of liquidation, assets are sold and amount realised. that amount are distrubuted to the shareholders.

what is the tax impact in the hands of company and in the hands of shareholders

MD. Ibrahim J. Attar

MD. Ibrahim J. Attar (Expert)

23 May 2011 As per Section 46 of the Income Tax Act, 1961 in case of distribution of assets by companies in liquidation -

1. When asses are transferred by way of distribution to the shareholders of a company on account of liquidation, such distribution shall not be regarded as transfer in the case of company.

2. In the case of shareholders of the company, capital gains shall be chargeable to tax on such distribution. For the purpose of computation of capital gains, the consideration shall be determined as:

a. Distribution in cash: Amount received less deemed dividend u/s 2(22)(c)

b. Distribution in kind: Fair market value of the asset on the date of distribution less deemed dividend. Such dividend is chargeable in the hands of the company and consequently, it is exempt in the hands of shareholders.

Hence, as per above the shareholders are liable to pay capital gains tax.

ANIL RAMDURG

ANIL RAMDURG (Querist)

24 May 2011 It is what type of capital gain in the hands of shareholders, it is short term or long term
?
The Company is making the slum sale and whatever amount is coming on that is distributing to the shareholders. now is company liable for tax or not because of slum sale ? and what is the treatment in the hands of shareholder?

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