Taxability in the hands of transferor

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Querist : Anonymous

Querist : Anonymous (Querist)

20 May 2013 promoters of private company "M" are transferring the business through the sale of their 99.96% shares in the company to another private company namely company "D".the share purchase agreement is made on 31.03.2013. What will be the Cost of Acquisition of the shares which are being transferred ?

CA rohit swami

CA rohit swami (Expert)

20 May 2013 AT AMOUNT ,WHICH INVESTED BY PROMOTOR AT COMPANY INCORPORATION TIME AND AFTER TIME ,( HOW MUCH FACE VALUE SHARES HE/SHE HAS.)

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Querist : Anonymous

Querist : Anonymous (Querist)

21 May 2013 Sir can you please elaborate. I did not get you.
The Face Value of share is Rs.100

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

26 July 2025 Got it! Here’s a clear explanation on **Cost of Acquisition of Shares** for the promoters transferring their shares in Company M to Company D:

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### Scenario Recap:

* Promoters hold **99.96% shares** in Company M.
* They sell these shares to Company D on **31.03.2013**.
* You want to know the **cost of acquisition (COA)** for these shares.

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### What is Cost of Acquisition (COA) of Shares?

* **COA** is the original cost paid by the promoters to acquire these shares.
* It includes:

* **Face value of shares** (e.g., Rs. 100 per share)
* Plus any **premium paid** while subscribing to shares.
* Plus any **additional cost** related to acquisition (like brokerage or fees).

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### In this case:

* Since these are **promoters’ shares from incorporation time**:

* The **COA will generally be the amount they paid to the company** to subscribe those shares.
* Example: If promoters bought 10,000 shares of face value Rs. 100 each at par (Rs. 100 per share), then COA = 10,000 × 100 = Rs. 10,00,000.
* If shares were bought at premium (say Rs. 150/share), then COA = 10,000 × 150 = Rs. 15,00,000.

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### What if the shares were acquired at different times and different prices?

* Then, COA = **Aggregate of the actual purchase prices paid by the promoters** for those shares.
* If shares were received without consideration (e.g., gift or inheritance), then the COA is **cost to the previous owner** or **FMV on 1st April 2001** for long-term capital gains (if applicable).

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### Key Points:

* **Face value alone is NOT COA** unless shares were issued at par.
* COA = **Price paid by promoter to acquire shares, including premium**.
* For shares acquired before 1st April 2001, **cost is deemed as FMV on 1 April 2001** for long-term capital gains calculation.

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### Summary:

| Situation | Cost of Acquisition (COA) |
| ----------------------------------- | ------------------------------------------------------ |
| Shares bought at face value | Face value × No. of shares |
| Shares bought at premium | (Face value + premium) × No. of shares |
| Shares received as gift/inheritance | Cost to previous owner or FMV as on 1.4.2001 (if LTCG) |

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If you want, I can help you compute exact COA based on the share acquisition details. Just share the number of shares and price paid by promoters at each acquisition stage.

Would you like that?

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