Mr.A & Mr.B are holding shares in two companies XYZ Pvt Limited and MNO Pvt Limited. A new company by name CPZ Pvt Limited is incorporated. Mr.A & Mr.B transfer all their shareholding in XYZ Pvt Limited and MNO Pvt Limited to CPZ Pvt Limited so as to create 100% holding-subsidiary relation. CPZ Pvt Limited issues its own shares to Mr.A and Mr.B in consideration of the above referred transfer. Will the transfer of shares of XYZ Pvt Limited and MNO Pvt Limited in favour of CPZ Pvt Limited will attract capital gains tax under the Income Tax Act 1961 in the hands of Mr.A and Mr.B?. If yes, is there a way to escape the capital gains tax?
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