Tax on repurchase of share after 31/05/2010

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

06 August 2010 My client is pvt ltd company and it has been alloted share to other pvt ltd co. B4 1 year, now they wants to repurchase that shares from other pvt ltd co. Share alloted @ Rs. 100 each of face value of Rs. 10 and repurchase value is Rs. 10 each in the current date means 1/8/2010.
Is there buyer liable to pay tax on deferent between book value (Rs.100) and repurchase value (Rs.10)?

Aditya Maheshwari

Aditya Maheshwari (Expert)
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06 August 2010 where a firm or a company not being a company in which the public are substantially interested, receives, in any previous year, from any person or persons, on or after the 1st day of June, 2010, any property, being shares of a company not being a company in which the public are substantially interested,—

(i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;

(ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration :

Hence the buyer will be liable for tax on the differential amount.

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Querist : Anonymous

Querist : Anonymous (Querist)

06 August 2010 Give me Section No. as per Income Tax.

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Aditya Maheshwari

Aditya Maheshwari (Expert)
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06 August 2010 Section 56(2)(viia).

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Querist : Anonymous

Querist : Anonymous (Querist)

06 August 2010 If my client alloted share to Individual or HUF and repurchase from them then what is the status?

OR

If my client alloted share Co. and repurchase from them in Individual account, then what is the status?

Aditya Maheshwari

Aditya Maheshwari (Expert)
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06 August 2010 Then the individual / HUF will be liable for tax u/s 56(2)(vii)

[(vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,—

(a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;

38b[(b) any immovable property, without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;]

(c) any property, other than immovable property,—

(i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;

(ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration :

Provided that where the stamp duty value of immovable property as referred to in sub-clause (b) is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of sub-clause (b) as they apply for valuation of capital asset under those sections :

Provided further that this clause shall not apply to any sum of money or any property received—

(a) from any relative; or

(b) on the occasion of the marriage of the individual; or

(c) under a will or by way of inheritance; or

(d) in contemplation of death of the payer or donor, as the case may be; or

(e) from any local authority as defined in the Explanation to clause (20) of section 10; or

(f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or

(g) from any trust or institution registered under section 12AA.

Explanation.—For the purposes of this clause,—

(a) “assessable” shall have the meaning assigned to it in the Explanation 2 to sub-section (2) of section 50C;

(b) “fair market value” of a property, other than an immovable property, means the value determined in accordance with the method as may be prescribed 38c;

(c) “jewellery” shall have the meaning assigned to it in the Explanation to sub-clause (ii) of clause (14) of section 2;

(d) “property” 38d[means the following capital asset of the assessee, namely:—]

(i) immovable property being land or building or both;

(ii) shares and securities;

(iii) jewellery;

(iv) archaeological collections;

(v) drawings;

(vi) paintings;

(vii) sculptures; 38e[***]

(viii) any work of art; 38f[or]

38f[(ix) bullion;]

(e) “relative” shall have the meaning assigned to it in the Explanation to clause (vi) of sub-section (2) of this section;

(f) “stamp duty value” means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property;]