Hitherto, only transfer of property to individuals and HUFs were only covered by the provisions of section 56 (2), whereas the recipient firms, companies, etc. were excluded from taxation. By proposed amendment, it is sought to tax the firms and closely held companies if they receive shares of a closely held company on or after 1st June, 2010, either without consideration or for inadequate consideration.
It must be kept in mind that even transfer of the shares which are held as stock in trade will be covered as the amendment proposed in the definition of “Property” does not apply here.
It applies only where the value of the shares transferred or difference between the consideration paid and the fair market value exceeds Rs. 50,000.
Cost of acquisition in the hands of the recipient firm or closely held company would be the fair market value of the shares so received.