If our AOP is purchased 5000 shares of ABC Private Limited Company (in which the public are subtantially not interested / unlisted) which face value is Rs 10/- each (5000 shares X 10/- = Rs. 50,000/-) and the fair market value of 5000 shares is Rs. 5,00,000/-.
How are we liable to pay income tax under the section 56(vii) or section 56(viia) or in any other section ?
56(2)(viia): Receipt of shares by a firm or closely held Company.
Applicable if:
1. Shares belong to a closely held company.
2. Donor is any person.
Without Consideration: if Fair Market value is more than Rs.50000/-:
For Donor: No Capital Gain because u/s 47(iii) it is not consider transfer.
For Donee: FMV is income from other Sources u/s 56(2)(viia).
Inadequate Consideration: if the difference of consideration and FMV is greater than Rs.50000/- than difference amount will be taxable for receiver.
For Donor: Capital Gain will be sale price – COA.
For Donee: Difference of FMV and Consideration is income from other Sources u/s 56(2)(viia).
However AOP/BOI,Turst are not covered dat y 56(2)viia not applicable.
Naveen Fintech Pvt Ltd
Kolkata
CA Inter
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Gupta Sachdeva & Co. Chartered Accountants
New Delhi
CA Final
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