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section 46(2)

Avya Agrawal (67 Points)

21 November 2017

can anyone explain the section with refernce to2(22)(c)

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Tarun Kumar Madaan (Practitioner) (4660 Points)
Replied 21 November 2017

When you receive money or other assets on the liquidation of company same is taxable as income under the head capital gain as per section 46(2) since it will be regarded as transfer.

However, Section 2(22)(C) also considers it as deemed dividend. Thus, only remaining portion will be taxable under the head capital gains.

Sale consideration will be calculated as below:

Money Received

Add: Market Value of Assets Received

Less: Amount treated as deemed dividend as per section 2(22)(C)

Balance will be sale consideration for the shares of liquidating company

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Avya Agrawal (67 Points)
Replied 22 November 2017

that is cost is nil and when we finally sale the shares normal cap gains will arise as usual with no effect of these sections and same for assets when sold subsequently reduced by 2(22)(c)

Avya Agrawal (67 Points)
Replied 22 November 2017

can u give an example

Tarun Kumar Madaan (Practitioner) (4660 Points)
Replied 22 November 2017

Suppose you have received Rs. 10,000 Cash and other assets having market value Rs. 10,000/- at the time of liquidation of company against your shares. Assuming Cost of acquisition of your shares are NIL.

Let’s say deemed dividend u/s 2(22)(C) is Rs. 5,000/-. Now Sale Consideration for the purpose of computing income taxable under Capital Gain will be as below:

	Money Received	10,000
Add:	Market Value of Assets Received	10,000
Less:	Amount treated as deemed dividend u/s 2(22)(C)	5,000
	Sale Consideration for the Purpose of Computing Capital Gain	15,000