COA of share held in demerged company
priyanka pal (110 Points)
23 August 2020
whether liab deducted while computing net book value of assets transferred in demerger.
4 Replies
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 23 August 2020
As per IndAS, a subsidiary has liabilities and recognised in the consolidated statements does not mean parent company will clear out the liabilities. Liabilities are consolidated and presented in the balance sheet for the investors interest in financial position of a group company. The subsidiary, a CGU, is a going concern/business entity which generates independent Cashflows to meet its liabilities.
A parent sells off the firm to a party or to subsidiary itself. Then, the tax liability arising due to de merger or sale of CGU is borne by the parent.
priyanka pal
(110 Points)
Replied 23 August 2020
Sorry, but my concern is for computing COA of share of resulting company u/s 49(2C) whether to deduct liab while computing net book value of assets transferred in demerger?
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 23 August 2020
Just like I suspected, net book value is the subsequent measurement of all tangible and intangible assets.
No need to deduct liabilities from net book value because the formula requires Net worth (equity components) in the denominator. It is clearly explained here: https://incometaxmanagement.com/Pages/Tax-Ready-Reckoner/GTI/Capital-Gain/Deemed-Cost-of-Acquition-of-Asset-for-computing-Capital-Gain.H T M L
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