ITR - UNLISTED EQUITY SHARES DETAILS IN ITR –should be simple and only when there is impact on income or loss of assesse and not in other cases. By dropping un-necessary reporting about unlisted shares lot of pressure on ITD portal and return preparer can be reduced.

[DEV KUMAR KOTHARI]

ITR - UNLISTED EQUITY SHARES DETAILS IN ITR –should be simple and only when there is impact on income or loss of assessee and not in other cases. By dropping un-necessary reporting about unlisted shares lot of pressure on ITD portal and return preparer can be reduced.

Reporting of shares of unlisted companies is posing many difficulties . Particularly in respect to companies in which shares are held for very long period when company was listed and then got delisted and is not working. Many such companies have been suspended from trading and not sending any report to shareholders.  About ten thousand companies are such which have been suspended, delisted, on stock exchanges during last 15-20 years. When there is no transaction in shares of such company, there is no purpose of IT Department seeking information about such companies.

 Impact on income or loss related to unlisted shares:

Unlisted shares are usually held as investments for controlling companies or for long term capital gains. Trading activity is not a common phenomenon for general tax payers. Off course there are few adventurers who purchase unlisted shares for trading purposes.

Impact on income or loss:

In case of unlisted shares there can be impact on income only when there is a deal of purchase and / or sale. For example:

In case of purchase, some additions may be called for low price paid, if any.  

In case of sale some additions may be called for if sold at low price.

In case of traders stock valuation may make some impact on taxable income or loss.  

There will be no impact, if there is no purchase or sale. A stock or investment brought forwarded and carry forwarded at cost or book value will  make no difference on taxable income. Only if stock-in-trade is valued at lower than cost or book value, then there will be impact on income. A higher valuation , simply will not be taxable.

Major impacts are found only in case of managed companies where a sale transaction has taken place or companies where there is change of management, then even small investors may get substantial gain or loss as per situation.

Unlisted Equity shares and form of ITR

It is understood that that simple forms of ITR for individuals/ HUF like  ITR-1 and ITR-4 can't be filed  by assesse  if he/she has held  any unlisted equity shares at any time during the previous year and ITR 2 or ITR 3 will be applicable.

Unlisted shares:

There are few listed companies which can be said negligible in comparison to total companies in India. On the website of MCA total number of different type of companies could not be found because details are given state wise.

For reporting, unlisted company will include any company whose equity shares were not listed on any day during the previous year in which at any time shares were held by assesse. In other words any company whose equity shares were not listed on any day of the previous year will be considered unlisted equity share for the purpose of reporting.

Details are to be furnished for equity shares held in unlisted companies at any time during the previous year that means any opening balance and any transaction in such shares held at any time is to be reported and closing balances are also to be reported.

Unlisted companies reporting coverage:

All companies whose shares are not listed as on closing day of previous year will be covered.  Such companies will include also a company which was a private company that got converted into public company and also got listed before end of previous year.

 All limited companies whose shares were not listed at any time during the previous year that is including those got listed before end of previous year and also those got delisted before end of previous year will be covered.

A company which was listed at any time but was not listed even on a single day during the previous year.

Companies who issued shares got listed but then got delisted at any time during the previous year or earlier years.

Details required for reporting are in page ‘add details of unlisted shares:

Most of details required are mandatory – indicated by red star * and many of them are very difficult to

Find out. In some cases it may not be applicable for example in case of foreign company PAN may not be applicable for time being.

Mandatory requirements are for the following details:

Name of company

Type of company – Domestic  / foreign.

PAN of company.

Opening balance – numbers and cost of acquisition

Shares acquired during the year –

 number,

date of purchase / subscription,

face value per share,

issue price per share,

 purchase price per share ,

Shares transferred during the year:

Numbers

Sale consideration

Closing balance:

Numbers

Cost of acquisition

It can be easily understood that in case of purchase of shares, the details of issue price are not relevant and are difficult to be ascertained in case of old companies who issued shares long ago. Similarly in case of many other details it will be difficult to ascertain PAN and many other details particularly in case of companies who issued shares long ago and then there have been  bonus issue, splitting of shares, corporate actions for reduction of face value, reduction of paid up value etc.  

If a mandatory detail is not filled in the sheet will not be validated and it will not be possible to upload ITR.

Whether following type of companies will be covered?

There are large number of companies which have been struck off from register of companies, many companies are in liquidation, and large number of companies have been suspended for trading at stock exchanges.

Such shares are almost illiquid. If there is no purchase and sale of such shares, there will be no impact on taxable income and no inquiry is really required.

A question arises is whether shares held in such companies are to be reported?