As per Section 56(2)(x) of the Income Tax Act, any person receives any property including shares of a company for a consideration less than the Fair Market Value, the Fair Market Value exceeding the consideration would be taxable in the hands of the person receiving such property. Clause 11 of proviso to Sec 56(2) (x) of the Income Tax Rules states certain classes of assesses to whom the provision of sec 56 56(2)(x) of the Income Tax Act would not apply.

The CBDT vide Notification No 40/2020 dated 29th June 2020 has replaced the said rule 11UAC of the said IT Rules. As per the revised rule effective from 1st day of April 2020 and shall be applicable for assessment year 2020-21 and subsequent assessment years wherein the provisions of Sec 56(2)(x) of the Income Tax Act would not apply to below: –

1. 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 has regularised the transactions of such immovable property based on the prescribed documents in favour of such resident

2. Any movable property, being unquoted shares, of a company and its subsidiary and the subsidiary of such subsidiary received by a shareholder, where:

    • The National Company Law Tribunal (‘NCLT’), on an application moved by the Central Government under Section 2412 of the Companies Act, 2013 has suspended the Board of Directors of such company and has appointed new directors nominated by the Central Government; and
    • Share of company and its subsidiary and the subsidiary of such subsidiary has been received pursuant to a resolution plan approved by the NCLT under Section 242 of the Companies Act, 2013

3. Any movable property, being equity shares of the reconstructed bank, received by the investors or the investor bank allotted under the Yes Bank Reconstruction Scheme (at a price specified in the said Scheme

Moreover the CBDT vide Notification No 42/2020 dated 30th June 2020 inserted a new Rule 11UAC with reference to which shares of an unlisted company (including shares of it subsidiary and subsidiary of such subsidiary) is received pursuant to a resolution plan approved by NCLT under sec 242 of The Companies Act, 2013 have also been excluded from the applicability of Sec 56(2)(x) as well as Sec 50CA of the Income Tax Act

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