Section 56(2)

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nirdeshbadjatya (Querist)
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30 June 2011 I have Been alloted 10000 shares of Rs 10/- each of a private limited company at Rs. 90/- per share including Rs. 80/- on share premium account. The book value of the share is Rs 250/-.

My question is that whether the difference of book value of Rs. 250/- and the allotment value of Rs. 90/- i.e. Rs 160/- per share is a benefit received by me and taxable as a gift U/s 56(2)(vii)(c)(ii).

whether the answer is different if i have purchased the said shares from another member.

whether the answer is different if the said company is a listed company and the said shares are alloted to me as right shares.

Kindly guide.
nirdesh

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CA PARAS BAFNA (Expert)
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01 July 2011 My question is that whether the difference of book value of250/- and the allotment value of90/- i.e.160/- per share is a benefit received by me and taxable as a gift U/s 56(2)(vii)(c)(ii).

Reply- Yes-it is taxable in case the benefit received by you exceeds Rs. 50000/-.Shares are treated as "property" for this section.

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CA PARAS BAFNA (Expert)
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01 July 2011 whether the answer is different if i have purchased the said shares from another member.

Reply- Answer is the same.

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CA PARAS BAFNA (Expert)
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01 July 2011 whether the answer is different if the said company is a listed company and the said shares are alloted to me as right shares.

Reply-
In this case in my view, fair market value
concept should be applied in the context of the right shares only.

The right shares are having the market value at which they are being allotted by the company to the shareholders of it, and as such it is not treated as gift.

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