Hi i got a doubt. If two companies called A ltd. and BLtd. merge together as AB ltd.The share holders of A ltd. are issued 5 ety shares for 1 ety. share held by them in A ltd. and any fractional amount ll be paid to the shareholders in cash. My doubt is that this fractional amount which is given in cash, will it be taxable in the hands of share holders as Capital gains or income from other sources? is it taxable under any head?Please Explain.........
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Taxability of purchase consideration
Replies (2)
no
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
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