Section 56 (2) (viib)
This query is : Resolved
16 October 2013
Is section 56 (2) (viib) applicable to convertible debentures?
-Rushina Thakkar
-Rushina Thakkar
16 October 2013
This section discussed only of valuation of shares but not talking about debentures.
So, as per my suggestion it will not applicable on debentures.
So, as per my suggestion it will not applicable on debentures.
16 October 2013
Apparently the amendment doesn't apply to convertible debentures.
However, since it is a recent one, you never know what view will the tax authorities take when such convertible debentures are converted into shares. As of now it appears that what matters is the year in which money was received.
if you are giving any opinion on this issue, It would be for your benefit to caveat it properly with regards to possibility of tax-department taking averse position at the time of conversion.
However, since it is a recent one, you never know what view will the tax authorities take when such convertible debentures are converted into shares. As of now it appears that what matters is the year in which money was received.
if you are giving any opinion on this issue, It would be for your benefit to caveat it properly with regards to possibility of tax-department taking averse position at the time of conversion.
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16 October 2013
Totally Agreed.
17 October 2013
Thank You for your prompt response.
But the section 56(2)(viib) says that “any consideration for issue of shares..” , so will these debentures when converted into equity shares be considered as consideration for issue of share? In other words at the time of issue of shares the consideration wont be cash consideration but will be debentures that would be taken back by the company.
Also Rule 11UA(c) mentions about unquoted shares and securities other than equity shares. What is the motive behind the inclusion of this clause?
But the section 56(2)(viib) says that “any consideration for issue of shares..” , so will these debentures when converted into equity shares be considered as consideration for issue of share? In other words at the time of issue of shares the consideration wont be cash consideration but will be debentures that would be taken back by the company.
Also Rule 11UA(c) mentions about unquoted shares and securities other than equity shares. What is the motive behind the inclusion of this clause?
17 October 2013
Dear Rushina,
As said before, it is not known what Income tax department will do when these conversions happen. It is too early to speculate. Though the language of the section suggest that convertible debentures may survive, you can never under-estimate Income tax department's fantasies.
Rule 11UA(c) is the reason why i am saying tax department may find ways to tax such transactions too.
As said before, it is not known what Income tax department will do when these conversions happen. It is too early to speculate. Though the language of the section suggest that convertible debentures may survive, you can never under-estimate Income tax department's fantasies.
Rule 11UA(c) is the reason why i am saying tax department may find ways to tax such transactions too.
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