Dear Sir,
In the case of purchase of unquoted equity shares (of a closely held company in india) from a non-resident shareholder by a resident (closely held) company in India .How will the income tax determine the Fair market value ? As per Rule 11 UA (c) (b) or based on DCF?
In this case the DCF is lower than the valuation as per Rule 11 UA(c) (b). and RBI does not allow a consideration greater than DCF to be paid to Non-resident shareholder.
This excel file will surely help you to calculate FMV of Unquoted Shares..
Dear Aswat
Sec 56 (2) (vii) is applicable to person resident in india and as in your case as your have issued shares to non resident, it will not applicable. And the section says :
Section 56(2) lists incomes chargeable to income tax under the head ‘Income from Other Sources.’ Finance Act, 2012 inserts clause (viib), with effect from 1-4-2013(assessment year 2013-14) to include ‘share premium’ received by a company in excess of its fair market value , as its income chargeable under the head ‘ Income from other sources.’ The clause is as follows:
“where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares, in such a case if the consideration received for issue of shares exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be chargeable to income tax under the head “Income from other sources”.
Thanks a ton Neha!
CCI
Pro
CAclubindia
