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QUERY ABOUT CAPITAL GAIN

20 May 2010

CAN ANY ONE SUGGEST ME ON THE BELOW MATTER......

LETS TAKE "A PVT. LTD." HAVING PAID UP CAPITAL OF 110000 @ Rs. 10 EACH RS. 1100000.

OUT OF WHICH 10000SHARES HELD BY OUT SIDERS....... LETS TAKE B PVT LTD. AND C PVT LTD. @ Rs. 1000 WITH PREMIUM OF Rs. 990 PER SHARE.

NOW THE DIRECTORS OF A PVT. LTD. WANT TO BUY THE SHARES FROM THE OUT SIDERS..... SO AT WHAT PRICE THEY CAN BYE BACK THE SHARES FROM OUTSIDERS........ AND HOW THE CAPITAL GAIN WILL BE CALCULATED ON THAT........ AND HOW THE CAPITAL GAIN TAX WILL BE REDUCED.......

REGARDS

AMIR KUMAR SAHU

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2 Replies

CA Shiv (Business Controller) (2987 Points)
Replied 20 May 2010

Amir,

Refer to buy back provisions first... see the reserve and alll... than fix a price which has to be higher than the amount at which actually offered... Than only they will be ready..

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(Guest)

in your case where all three are Pvt. ltd company the fair value for transfer of shares would be the Net asset value or book value of shares which should be the price for acquisition.

further unless the company being acquired has book value above and over the nominal value there is no capital gain as the transfer price would be around nominal value of each share. again the price will depend on the books of the individual company and accordingly the capital gain assessment will take place.

if you can justify the nominal value or the allotment value being the price for acquisition there will be no liability of capital gain tax.

contrary view is welcome