section 46(2)

When you receive money or other assets on the liquidation of company same is taxable as income under the head capital gain as per section 46(2) since it will be regarded as transfer.

However, Section 2(22)(C) also considers it as deemed dividend. Thus, only remaining portion will be taxable under the head capital gains.

Sale consideration will be calculated as below:

Money Received

Add: Market Value of Assets Received

Less: Amount treated as deemed dividend as per section 2(22)(C)

Balance will be sale consideration for the shares of liquidating company

Suppose you have received Rs. 10,000 Cash and other assets having market value Rs. 10,000/-  at the time of liquidation of company against your shares. Assuming Cost of acquisition of your shares are NIL.

Let’s say deemed dividend u/s 2(22)(C) is Rs. 5,000/-. Now Sale Consideration for the purpose of computing income taxable under Capital Gain will be as below: