“Any movable property, being unquoted shares, of a company and its subsidiary and the subsidiary of such subsidiary received by a shareholder, where the Tribunal, on an application moved by the central government under section 241 of the Companies Act, 2013, has suspended the Board of Directors of such company and has appointed new directors nominated by the central government under section 242 of the said Act; and share of company and its subsidiary and the subsidiary of such subsidiary has been received pursuant to a resolution plan approved by the Tribunal under section 242 of the Companies Act, 2013 after affording a reasonable opportunity of being heard to the jurisdictional Principal Commissioner or Commissioner,” the Central Board of Direct Taxes (CBDT) said in a notification on Tuesday.
Section 56(2)(x) provides that in case shares of a company is received for a consideration less than its fair market value or discount, then shareholder is required to pay tax on such discount.
“Such an exemption will encourage more investors and make such reconstruction schemes more lucrative and viable,” said Suraj Nangia, Partner, Nangia Andersen LLP.
Separately, government has allowed for tax exemption to people receiving property in unregularised colonies, which are now regularised.
“Any immovable property, being land or building or both, received by a resident of an unauthorised colony in the National Capital Territory of Delhi, where the central government by notification in the Official Gazettee, regularised the transactions of such immovable property based on the latest Power of Attorney, Agreement to Sale, Will, possession letter and other documents including documents evidencing payment of consideration for conferring or recognising right of ownership or transfer or mortgage in regard to such immovable property in favour of such resident,” the notification dated June 29 stated.
Presently tax is levied only on differential of fair market value compared with actual purchase price, if property is acquired at a discounted price.
“All the acquisitions before that date of regularisation have been tax exempted by way of present notification, so that individual residents don’t have to pay tax on any notional income, even if fair market value as on date of regularisation is more than the purchase price of such property,” Nangia added.
The notification will come into effect from April 1, 2020 and shall be applicable for assessment year 2020-21and subsequent assessment years.