Transfer of Shares of Pvt Ltd

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This discussion addresses the tax implications of shareholders of B Pvt Ltd purchasing shares in A Pvt Ltd, where B Pvt Ltd holds a stake in A Pvt Ltd. The key concern is whether transferring shares at face value is permissible under the Income Tax Act. Experts advise that a valuation report from a Registered Valuer is crucial; if this valuer supports the face value, the transfer should be smooth. Otherwise, the Income Tax department may raise objections.

CA Maulik Bagdai

CA Maulik Bagdai (Querist)
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13 January 2020 A Pvt Ltd and B Pvt Ltd are Associate companies...

B Pvt Ltd holds 50% shares of A Pvt Ltd...

5 share holders are there in B Pvt Ltd, Now B Pvt Ltd share holders wants to purchase 10% share of A Pvt Ltd from B Pvt Ltd and after that want to close B Pvt Ltd..

Share holders of B Pvt Ltd will become share holders of A Pvt Ltd..

Now if B Pvt Ltd transfer it's share at Face value of Rs.10 in A Pvt Ltd then is there any issue under income tax act..??

CA Mohit Bansal

CA Mohit Bansal (Expert)
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13 January 2020 The transfer of shares should be done at value supported by valuation report signed by a Registered Valuer. If Registered Valuers assign the value at face value then the transfer can be done without any problem else you may face additions from the IT department.

CA Maulik Bagdai

CA Maulik Bagdai (Querist)
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13 January 2020 Registered valuer to be Merchant Banker..??

CA Mohit Bansal

CA Mohit Bansal (Expert)
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14 January 2020 IBBI Registered Valuer for Asset Class Securities and Financial Assets

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