How to tax purchase consideration paid in cash

There would be no capital gain on receiving cash on fractional amount of share.

However if it is in the terms of merger to give cash on eq. shares like rs. 50 on each eq. share, then it will be taxable as captal gain.

In this regard, in the case of Gautam Sarabhai Trust, 173 ITR 216 the Gujarat High Court held that if besides shares, the shareholders of the amalgamating company are allotted something more in exchange like say bonds or cash, etc., then the swap will not get the benefit of exemption from capital gains.

Sale of fraction shares is taxable under the head capital gains. as the shareholder is receiving consideration for sale of shares only.

Mr.Aditya, I think u didnot get my question...suppose i hold i hold 88 shares in A ltd. of Rs.100 each..A ltd. gets merged with B ltd. to form AB ltd. I am given 1 ety share of Rs. 150 each of AB Ltd. for every 5 shares held by me in A ltd. and fractional amopunt be paid to me by cash..so i will get 17 shares of Rs.150 each and for the fractional part of .6 shares of Rs.150 each i ll be paid in cash..Under what head this fractional head be taxed under income tax act,1961...Please clarify...also quote applicable sections or case laws...Thanks 

nothin will be traeted as income in the hands of sahreholder...nor as capital gain.....as this is not transfer of capital asset...and reciving cash for fractional part of shares..is deemed as distribution of assets at the time of liquidation(as A ltd. is dicontinuing its oprtns).....and cash received will be deemed dividend...as defined u/s115'O' and the same is exempt u/s10(34)

receiving ety shares as purchase consideration is not a transfer of capital asset......refer sec.47

also agree with saurabh sir ...if its a case of surrender of sahres at the tme of merger then nething received as purchase consideration will be taxable in the hands of shareholders........

here plz note that in your case you are not rendering your shares so nothing iz taxable in your hands...:)