Gift received by firm or closely held company - Section 56(2)(viia) - Income Tax - Ready Reckoner - Income Tax

Section 56(2)(viia) GIFT RECEIVED BY FIRM OR CLOSELY HELD COMPANY Where a firm or a company not being a public company, receives in any previous year from any person or persons on or after 01-06-2010 but before 1-4-2017 , shares of a company not being a public company Without Consideration , the aggregate fair market value (FMV) of which exceeds 50,000, the whole of the FMV of such shares. For a consideration which is less than FMV of shares by an amount exceeding 50,000, the aggregate fair market value of such shares as exceeds such consideration. (FMV Consideration by 50,000) Exception :- Section 56(2)(viia) shall not apply where shares are received in scheme of business reorganization, amalgamation or demerger, which are not regarded as transfer under clause (via), (vic), (vicb), (vid), (vii) of section 47 of the Act. CBDT has issued Circular No. 10/2018 dated 31.12.2018 clarifying applicability of section 56(2)(viia) of the Income-tax Act, 1961 for issue of shares by a company in which public are not substantially interested. It is hereby clarified that section 56(2)(viia) of the Act shall apply in cases where a specified company or firm receives the shares of the specified company through transfer for no or inadequate consideration. Hence, the provisions of section 56(2)(viia) of the Act shall not be applicable in cases of receipt of shares by the specified company or firm as a result of fresh issuance of shares, by the specified company.