U/s 56 of the income tax act

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KEWAL KRISHAN GUPTA (Querist)
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16 February 2019 Allotment of equity shares made at share premium in excess of fair market value - but share premium amount not recovered/ recoverable at all - just a book entry. whether to be treated as Income U/s 56 of the I.T Act.

Nilesh Gami

Nilesh Gami (Expert)
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18 February 2019 if it is allotted at premium in excess of fair market value, shall be chargeable to tax according to sec 56(2)(vvib). Consideration need not be in cash or exchange of other valuable asset, even book entry adjustment may also considered as consideration. In this given case, nature of consideration or adjustment needs to be considered for correct treatment.
If person receives shares without consideration, it may taxable in the hands of recipient according to sec 56(2)(vii).