section 56

Cash Transactions in Agriculture Sector- Income Tax Provisions

Income Tax - In India, a large population is engaged in the agriculture sector and there are numerous transactions regarding sale and purchase of agriculture produce. The farmers sell their agriculture produce to Pacca Arahtias i.e. traders through kachha Arahtias. Kachha arahtia are commission agents and are only facilitators of auctions/sales of agr...

Read More

Restrictions on Cash Transactions in Real Estate under Income Tax

Income Tax - Restrictions on Cash Transactions in Real Estate under Income Tax, 1961 (Section 50C, section 43CA and section 56(2)(x)) ♦ Stakes in transactions in immovable properties are quite high and so are the tax implications. It is not only perceived but an open secret in India that sale transactions of immovable properties are undervalued lead...

Read More

Income Tax Relief for home buyers & Real Estate Developers

Income Tax - In a recent press conference conducted by the Hon’ble Finance Minister Ms. Nirmala Sitharaman on 12th November 2020 followed by a press release dated 13th November 2020, Diwali gift for the real estate developers and home buyers was announced in the form of income tax relief where a new amendment was proposed in section 43CA […]...

Read More

Buying your dream home becomes cheaper this Diwali!

Income Tax - As a part of the AatmaNirbhar Bharat Package 3.0, announced on 12th November 2020 our Hon. Finance Minister Smt. Nirmala Sitharaman – a relief has been provided to real estate developers and buyers, by increasing the percentage of safe harbor to 20%. One can now buy a house at a rate of 20% lower than the circle rate. This new norm is f...

Read More

Thank You FM for the Income Tax Relief to Real Estate Sector BUT enlargement of scope of Relief is necessary

Income Tax - On the occasion of Dhanteras, FM has announced an Atmanirbhar Bharat Package 3 for over Rs. 2.65 lakh crores. A Demand Booster has been announced for the Real Estate Sector by giving Tax relief for the Developers & Home Buyers under the Income Tax Act....

Read More

Representation to FM to Widen Scope of Benefit of 20% for flats

Income Tax - Representation for widening the scope of benefit in case of difference in agreement price and Circle Rate of property is upto 20 per cent for the purpose of Income tax. ...

Read More

Income Tax Exemption to Owners of Unauthorized Colonies In Delhi

Income Tax - Over 1700 unauthorized colonies in Delhi were regularised in December last year. Owners Delhi’s unauthorised colonies will now get Income Tax Exemption even if they have purchased land or house at rates below the prevailing market price. The Income Tax Department issued a Notification grating the exemption on any immovable property bein...

Read More

Cabinet approves Taxation Laws (Amendment) Bill, 2019

Income Tax - In order to attract fresh investment in manufacturing and provide boost to 'Make-in India' initiative of the Government, another provision was inserted to the IT Act, to provide that a domestic manufacturing company set up on or after 1st October, 2019 and which commences manufacturing by 31st March, 2023, may opt to pay tax at 15% plus s...

Read More

No scrutiny of Start-ups related to valuations of share premiums 

Income Tax - Start-ups and their investors filing requisite declarations not to be subjected to any scrutiny regarding valuations of share premiums  E-verification mechanism proposed for establishing identity of the investor and source of his funds TV programme proposed exclusively for Start-ups within the DD bouquet of channels Government to launch ...

Read More

CBDT Circular on anti-abuse provisions in cases of receipt of shares

Income Tax - Central Board of Direct Taxes had issued Circular 10/2018 dated 31.12.2018 to clarify that provisions of section 56(2)(viia) of the Income-tax Act, 1961 being anti-abuse provisions shall not be applicable in cases of receipt of shares by the specified company or firm as result of fresh issuance of shares including by way of bonus shares, ...

Read More

Netting off Interest Expenditure against Interest Income in absence of direct relation Not Allowed

Deena Asit Mehta Vs DCIT  (ITAT Mumbai) - The issue under consideration is whether the netting off interest expenditure against interest income is allowed u/s 56 of Income Tax Act?...

Read More

Section 56(2)(vii)(b) Not Applicable if It Is Not Enacted as on Date of Agreement

ACIT Vs Sri Anala Anjibabu (ITAT Visakhapatnam) - The issue under consideration is whether provisions of section 56(2)(vii)(b)(ii) are applicable on difference between consideration paid for purchase of property and SRO value as on date of agreement?...

Read More

FMV of shares: Jurisdiction of AO to reject valuation methods adopted by Assessee

Canvera Digital Technologies Pvt. Ltd Vs DCIT (ITAT Bangalore) - Canvera Digital Technologies Pvt. Ltd Vs DCIT (ITAT Bangalore) From the details filed, Ld.AO observed that, assessee had computed the value as per DCF method and that there was nothing to suggest that DCF method was an appropriate method to value the shares. Ld.AO rejected DCF method adopted by asse...

Read More

In absence of agreement SDV on First Digital Payment date can be adopted for Section 50C & 56(2)(x)

Radha Kishan Kungwani Vs ITO (ITAT Jaipur) - The issue under consideration is whether the stamp duty valuation at the time of first digital payment can be adopted if the agreement to sale is lost or inaccessible for any reason whatsoever?...

Read More

AO cannot reject selection & valuation methods adopted by taxpayer

GSE Commerce Private Ltd. Vs ACIT (ITAT Bangalore) - GSE Commerce Private Ltd. Vs ACIT (ITAT Bangalore) The A.O. was of the view that the shares of the company have been over valued and accordingly asked the assessee to justify the valuation. After considering the explanations of the assessee, the A.O. took the view that the valuation report has been ...

Read More

Income Tax relief for Real-estate Developers and Home Buyers

Release ID: 1672636 - (13/11/2020) - In order to boost demand in the real-estate sector and to enable the real-estate developers to liquidate their unsold inventory at a rate substantially lower than the circle rate and giving benefit to the home buyers, it has been decided to further increase the safe harbour from 10% to 20% under sec...

Read More

Rule 11UAC Exemption from deeming provisions of section 56(2)(x)

Notification No. 40/2020-Income Tax [G.S.R. 421(E)] - (29/06/2020) - Rule 11UAC Exemption from deeming provisions of section 56(2)(x)-Prescribed class of persons for the purpose of clause (XI) of the proviso to clause (x) of sub-section (2) of section 56- Income Tax Notification No. 40/2020 dated 29th June, 2020. MINISTRY OF FINANCE (Department of Revenue) (CENTRAL B...

Read More

CBDT revises definition of unauthorised colonies of NCT of Delhi

Notification No. 12/2020-Income Tax [G.S.R. 124(E)] - (17/02/2020) - CBDT has vide Notification No. 12/2020-Income Tax  revises definition of unauthorised colonies of NCT of Delhi for rule 11UAC read with Section Section 56(2)(x). Earlier CBDT has provided vide Notification No. 96/2019-Income Tax dated 11th November, 2019 that Section 56(2)(x)  not applies to speci...

Read More

CBDT notifies more modes of e-payments; 6DD limit reduced to ₹ 10000

Notification No. 08/2020-Income-Tax [G.S.R. 56(E)] - (29/01/2020) - Notification No. 8/2020-Income-Tax- CBDT has notified Other electronic modes by inserting New Income TAx Rule 6ABBA. It also amended marginal heading of rule 6DD and in rule 6DD for the words ‘account payee bank draft, exceeds twenty thousand rupees’, the words, figures and letters ̵...

Read More

Section 56(2)(x) CBDT grants exemption to resident of unauthorised colony

Notification No. 96/2019-Income Tax [G.S.R. 836(E)] - (11/11/2019) - Unauthorised colony means a colony or development comprising of a contiguous area, where no permission has been obtained for approval of layout plan or building plans and has been identified for regularisation of such colony...

Read More

Recent Posts in "section 56"

Netting off Interest Expenditure against Interest Income in absence of direct relation Not Allowed

Deena Asit Mehta Vs DCIT  (ITAT Mumbai)

The issue under consideration is whether the netting off interest expenditure against interest income is allowed u/s 56 of Income Tax Act?...

Read More

Cash Transactions in Agriculture Sector- Income Tax Provisions

In India, a large population is engaged in the agriculture sector and there are numerous transactions regarding sale and purchase of agriculture produce. The farmers sell their agriculture produce to Pacca Arahtias i.e. traders through kachha Arahtias. Kachha arahtia are commission agents and are only facilitators of auctions/sales of agr...

Read More
Posted Under: Income Tax |

Restrictions on Cash Transactions in Real Estate under Income Tax

Restrictions on Cash Transactions in Real Estate under Income Tax, 1961 (Section 50C, section 43CA and section 56(2)(x)) ♦ Stakes in transactions in immovable properties are quite high and so are the tax implications. It is not only perceived but an open secret in India that sale transactions of immovable properties are undervalued lead...

Read More
Posted Under: Income Tax |

Section 56(2)(vii)(b) Not Applicable if It Is Not Enacted as on Date of Agreement

ACIT Vs Sri Anala Anjibabu (ITAT Visakhapatnam)

The issue under consideration is whether provisions of section 56(2)(vii)(b)(ii) are applicable on difference between consideration paid for purchase of property and SRO value as on date of agreement?...

Read More

Income Tax Relief for home buyers & Real Estate Developers

In a recent press conference conducted by the Hon’ble Finance Minister Ms. Nirmala Sitharaman on 12th November 2020 followed by a press release dated 13th November 2020, Diwali gift for the real estate developers and home buyers was announced in the form of income tax relief where a new amendment was proposed in section 43CA […]...

Read More
Posted Under: Income Tax |

Buying your dream home becomes cheaper this Diwali!

As a part of the AatmaNirbhar Bharat Package 3.0, announced on 12th November 2020 our Hon. Finance Minister Smt. Nirmala Sitharaman – a relief has been provided to real estate developers and buyers, by increasing the percentage of safe harbor to 20%. One can now buy a house at a rate of 20% lower than the circle rate. This new norm is f...

Read More
Posted Under: Income Tax |

Thank You FM for the Income Tax Relief to Real Estate Sector BUT enlargement of scope of Relief is necessary

On the occasion of Dhanteras, FM has announced an Atmanirbhar Bharat Package 3 for over Rs. 2.65 lakh crores. A Demand Booster has been announced for the Real Estate Sector by giving Tax relief for the Developers & Home Buyers under the Income Tax Act....

Read More
Posted Under: Income Tax |

Representation to FM to Widen Scope of Benefit of 20% for flats

Representation for widening the scope of benefit in case of difference in agreement price and Circle Rate of property is upto 20 per cent for the purpose of Income tax. ...

Read More
Posted Under: Income Tax | ,

Income Tax relief for Real-estate Developers and Home Buyers

Release ID: 1672636 (13/11/2020)

In order to boost demand in the real-estate sector and to enable the real-estate developers to liquidate their unsold inventory at a rate substantially lower than the circle rate and giving benefit to the home buyers, it has been decided to further increase the safe harbour from 10% to 20% under section 43CA of the Act for the period from...

Read More

New Income Tax relief for Developers & Home Buyers

Income Tax relief for Developers & Home Buyers in Atmanirbhar Bharat Package 3.0 Differential between circle rate and agreement value in real estate income tax under Section 43 CA of IT Act has been increased from 10% to 20%. This is for primary sale of residential units up to ₹ 2 Crore (from date of […]...

Read More
Posted Under: Income Tax |

FMV of shares: Jurisdiction of AO to reject valuation methods adopted by Assessee

Canvera Digital Technologies Pvt. Ltd Vs DCIT (ITAT Bangalore)

Canvera Digital Technologies Pvt. Ltd Vs DCIT (ITAT Bangalore) From the details filed, Ld.AO observed that, assessee had computed the value as per DCF method and that there was nothing to suggest that DCF method was an appropriate method to value the shares. Ld.AO rejected DCF method adopted by assessee for the reasons that cash […...

Read More

In absence of agreement SDV on First Digital Payment date can be adopted for Section 50C & 56(2)(x)

Radha Kishan Kungwani Vs ITO (ITAT Jaipur)

The issue under consideration is whether the stamp duty valuation at the time of first digital payment can be adopted if the agreement to sale is lost or inaccessible for any reason whatsoever?...

Read More

AO cannot reject selection & valuation methods adopted by taxpayer

GSE Commerce Private Ltd. Vs ACIT (ITAT Bangalore)

GSE Commerce Private Ltd. Vs ACIT (ITAT Bangalore) The A.O. was of the view that the shares of the company have been over valued and accordingly asked the assessee to justify the valuation. After considering the explanations of the assessee, the A.O. took the view that the valuation report has been prepared on the basis […]...

Read More

Gift Received from Brother-in-Law is Exempt under section 56(2)

PCIT Vs Arvind N Nopany (Gujarat High Court)

PCIT Vs Arvind N Nopany (Gujarat High Court) The issue under consideration is whether the gift received from Brother-in-law is exempt u/s 56(2) of I T Act? High Court states that, the tribunal took into consideration the details of the donor, more particularly, the PAN number, capital gain statement, bank statements and the other relevant...

Read More

AO cannot challenge or change method of valuation opted by assessee as per his whims & fancies

Nabh Multitrade Pvt. Ltd. Vs ITO (ITAT Jaipur)

Nabh Multitrade Pvt. Ltd. Vs ITO (ITAT Jaipur) There is no dispute that during previous year relevant to assessment year under consideration the assessee issued 37,500 equity shares of Rs. 10/- each for a price of Rs. 200/- each which includes the share premium of Rs. 190/- per share. To substantiate the value of equity […]...

Read More

In absence of any defect DCF valuation method of Assessee cannot be rejected

Intelligrape Software Pvt. Ltd. Vs ITO (ITAT Delhi)

Intelligrape Software Pvt. Ltd. Vs ITO (ITAT Delhi) When the assessee Company had opted for valuation of unquoted equity shares in accordance with DCF method as prescribed under clause (b) of specific Rule 11UA(2) as applicable, the AO/CIT(A) had no power/authority to change such valuation methodology and adopt a different book value meth...

Read More

No Tax on transfer of property under family settlement

Govind Kumar Khemka Vs ACIT (ITAT Delhi)

In this case, since there was a Family Settlement between the assessee and three brothers and they have acted upon Family Settlement Deed and distributed various properties among themselves and necessary rights and title are transferred in favour of each brother would show that parties have entered into genuine transaction....

Read More

AO cannot change share valuation Method opted by Assessee

Taaq Music Pvt. Ltd Vs ITO (ITAT Bangalore)

Taaq Music Pvt. Ltd Vs ITO (ITAT Bangalore) The law provides that, the fair market value may be determined with such method as may be prescribed or the fair market value can be determined to the satisfaction of the Assessing Officer. The provision provides an Assessee two choices of adopting either NAV method or DCF […]...

Read More
Posted Under: Income Tax |

Taxability of Gift Received By A Person

Any person receives Gift from any other person, would be consider as income of the recipient as per section 56(2)(x) with certain exemptions. Section 56(2)(x) was inserted by Finance Act 2017 w.e.f.1st April, 2017 read as under: Where any person receives, in any previous year, from any person or persons on or after 1st day […]...

Read More
Posted Under: Income Tax |

Addition for Bonus shares – Section 56(2)(vii)- ITAT explains Law

DCIT Vs Veena Goyal (ITAT Jaipur)

DCIT Vs Veena Goyal (ITAT Jaipur) As per the provisions of the section 56(2)(vii)(c)(i), any property other than immovable property is transferred for a consideration which is less than the aggregate fair market value of the property by an amount exceeding Rs. 50000/-, the aggregate fair market value of such property as exceeds such consi...

Read More

Amount received through Will of God Mother Eligible for Exemption u/s 56(2)(vii)

Cynthia Ramona Chellappa Vs. ITO (ITAT Chennai)

Cynthia Ramona Chellappa Vs. ITO (ITAT Chennai) The issue under consideration is whether the amount received through the Will of God-Mother is eligible for exemption u/s 56(2)(vii)? ITAT states that a perusal of the provisions of Section 56(2)(vii) shows that any amount received by an individual without consideration and the aggregate val...

Read More

No addition u/s 56(2)(vii)(b) if difference in valuation is less than 5%

Shri Rama Jogi Reddy Sanepalli Vs ITO (ITAT Bangalore)

Shri Rama Jogi Reddy Sanepalli Vs ITO (ITAT Bangalore) ITAT Pune Bench in the case of Ratnakanta B. Agarwal v. ITO, ITA 587/PUN/2014, order dated 24.07.2017 wherein the Hon’ble Pune Bench took the view that if the variance between the value estimated as fair market value by the DVO and the value adopted by the […]...

Read More

Section 50C:  Increase to 10% in variation between stamp duty value & consideration is retrospective

Sri Sandeep Patil Vs. ITO (ITAT Banglore)

Sri Sandeep Patil Vs. ITO (ITAT Banglore) ITAT held that difference between the value adopted by stamp valuation authority and actual consideration is to be ignored if the same is less than 10%. We also notice that the Parliament has introduced third proviso in section 50C(1) of the Act, as per which the difference in […]...

Read More

Applicability of deeming provisions of Section 56(2)(x) of IT Act to buyer of undertaking under Slump Sale u/s 50B of IT Act

Applicability of deeming provisions of Section 56(2)(x) of Income Tax Act to buyer of undertaking under Slump Sale under section 50B of Income Tax Act, 1961 There were lots of controversies about taxation of such a sale of business as a going concern due to period of holding of the assets etc. To resolve the […]...

Read More
Posted Under: Income Tax |

AO cannot change share valuation method adopted by taxpayer

Karmic Labs Pvt. Ltd. Vs ITO (ITAT Mumbai)

Karmic Labs Pvt. Ltd. Vs ITO (ITAT Mumbai) We note that the assessee has issued shares at a premium. In order to ascertain the market value of the shares, the assessee adopted DCF method, as prescribed under Rule 11UA r.w.s 56(2) of the Act and accordingly, the shares were issued at a premium. According to […]...

Read More

Taxability of Gifts

Taxability of Gifts {Section 56(2)(x) of Income Tax Act, 1961} To prevent the practice of receiving sum of money or the property without consideration or for inadequate consideration, section 56(2)(x) brings to tax any sum of money or the value of any property received by any person without consideration or the value of any property [&hel...

Read More
Posted Under: Income Tax |

Income Tax Exemption to Owners of Unauthorized Colonies In Delhi

Over 1700 unauthorized colonies in Delhi were regularised in December last year. Owners Delhi’s unauthorised colonies will now get Income Tax Exemption even if they have purchased land or house at rates below the prevailing market price. The Income Tax Department issued a Notification grating the exemption on any immovable property bein...

Read More
Posted Under: Income Tax |

Startup Recognition & Tax Exemption

Startup Recognition & Tax Exemption Under the Startup India Action Plan, startups that meet the definition as prescribed under vide G.S.R. 127(E) dated 19th February, 2019 are eligible to apply for recognition under the program. The Startups have to provide supporting documents, at the time of application. Eligibility Criteria for Sta...

Read More
Posted Under: Income Tax |

Impetus to start-ups – a tax and regulatory perspective

In todays environment, start-ups are crucial as they focus on innovation, lead to employment generation and promote research and development. As per recent study conducted by IBM and Oxford, 90% of India’s start-ups fail within the first five years despite Indias entrepreneurial strengths....

Read More
Posted Under: Income Tax |

Selective capital reduction – Applicability of section 50CA & section 56(2)(x) of Income-tax Act, 1961

Capital reduction refers to corporate reorganisation activity in which the existing share capital is extinguished. Companies consider utilising this route for various business reasons, such as returning excess capital to shareholders, distributing assets to shareholders, loss of original share capital due to accumulated business losses, e...

Read More
Posted Under: Income Tax |

Section 50CA: Implications of double taxation

Section 50CA provides for adoption of the value to be determined as per the Rules, (for convenience sake referred to by me as FMV ) as the consideration for transfer of shares of a company which are not being quoted, where the actual consideration is lower than that. The difference shall be subjected to tax in the hands of the transferor....

Read More
Posted Under: Income Tax |

ITAT deletes addition for share premium as Assessee establishes identity, genuineness & creditworthiness of investor

ITO Vs M/s Heckyl Technologies Pvt.Ltd. (ITAT Mumbai)

ITO Vs M/s Heckyl Technologies Pvt.Ltd. (ITAT Mumbai) Firstly, the AO has clearly mentioned at paragraph no. 5 on page no’s, 6 and 7 of his order that he had made two references to the tax authorities in Mauritius and the UK. These references had been made under section 90 of the Act and had […]...

Read More

Surgical Strike on Cash Transactions

a) Legal Measure Applicable to Receipt of Money i. Section 13A : Exemption for certain income of political parties No donation exceeding Rs.2000 is received by such political party otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank […]...

Read More
Posted Under: Income Tax |

Start-ups: Registration, benefits & lower income tax rate of 15%

This article explains meaning of Eligible start-up, process of recognition of an entity as eligible start-up, various benefits available to a startup and related procedural & legal aspects Section/ Notification Provision Explanation (i) & (ii) to section 80-IAC Read with Notification dt. 19 Feb. 2019       “El...

Read More
Posted Under: Income Tax |

AO cannot change valuation method from DCF to book value method

Alishan Palace Resorts Pvt Ltd. Vs ITO (ITAT Cuttack)

Alishan Palace Resorts Pvt Ltd. Vs ITO (ITAT Cuttack) in the instant case, the value adopted and computed by the assessee as per Rule 11UA(2)(c)(b) by following DCF method at Rs.51/85 and the assessee company has received shares and issued/allotted @ Rs.50 per share including premium and this rate has not been contested or challenged [&he...

Read More

Valuation of Unquoted Equity Shares

Computation of Fair Market Value [FMV] of Unquoted Equity Shares as per Income-tax (20th Amendment), Rules, 2017 notified vide Notification No. 61/2017, dated 12.07.2017. Sale is applicable With Effec From 01.04.2018 and shall apply to assessment year 2018-19 & subsequent years....

Read More
Posted Under: Income Tax |

Taxation of Share Premium

Taxation of share premium is a relatively new but litigated area of taxation. This article examines the two alternative approaches the AO should adopt while examining the issue where share premium received is in excess of its fair market value, i.e. the route of Section 68 or Section 56 (2)(viib)....

Read More
Posted Under: Income Tax |

Section 56(2)(vii)(b) cannot be Invoked in case of Agricultural Land

Sh. Prem Chand Jain Vs ACIT (ITAT Jaipur)

The issue under consideration is whether the provisions of section 56(2)(vii)(b) can be invoked in case of agricultural land where it doesn’t qualify as falling in the definition of capital asset?...

Read More

Analysis of Section 56 read with Rule 11UA

Analysis of Section 56 read with Rule 11UA – Valuation of Property, Unquoted Equity Shares or Equity Shares of a Company in which public are not substantially interested: Section 56(2)(x) of Income tax Act, 1961 provides that following will be taxable in the hands of recipient: Sr. No. What is taxable Taxable Value Applicable Valuation ...

Read More
Posted Under: Income Tax |

Increase in safe harbour limit to 10%- section 43CA, 50C & 56

Increase in safe harbour limit of 5% under section 43CA, 50C and 56 of Income Tax Act, 1961 to 10% Section 43CA of the Income Tax Act, inter alia, provides that where the consideration declared to be received or accruing as a result of the transfer of land or building or both, is less than […]...

Read More
Posted Under: Income Tax |

Issue of Share at a premium: AO cannot change valuation method

Signure Technologies Pvt. Ltd. Vs ACIT (ITAT Bangalore)

ITAT held that AO can scrutinize the valuation report and he can determine a fresh valuation either by himself or by calling a determination from an independent valuer to confront the assessee but the basis has to be DCF method and he cannot change the method of valuation which has been opted by the assessee....

Read More

AO cannot change Share Valuation Method adopted by taxpayer

VBHC Value Homes Pvt. Ltd. Vs ITO (ITAT Bangalore)

AO can scrutinize the valuation report and he can determine a fresh valuation either by himself or by calling a determination from an independent valuer to confront the assessee but the basis has to be DCF method and he cannot change the method of valuation which has been opted by the assessee....

Read More

Income Tax Law Relating To Cash Transactions

A number of new provisions have been introduced in the Income Tax Act from time to time to put restrictions on cash transactions as well as to incentivise the non-cash transactions. Cash transactions have always played a major role in the Indian Economy and consistently were responsible for generation and accumulation of Black Money. The ...

Read More
Posted Under: Income Tax |

Recognition and Benefits for Startups including Tax Benefits

Startup India Scheme is an initiative by the Government of India under leadership of Mr. Narendra Modi for generation of employment and wealth creation. The goal of Startup India is to develop and innovate products and services and increase the employment rate in India. To promote growth and help Indian economy, many benefits are being g...

Read More
Posted Under: Income Tax |

Corporate Gifts- An allowable transaction under Income tax?

Compilation of Section 47(iii), section 56(2)(x)(c), 50D & 50CA -Corporate gifts- an allowable transaction under Income tax? Purpose of section 56 defeated by the ITAT judgement? Brief overview of the judgement delivered On October 4, 2019, in a recent judgement of M/s Direct Media Distribution Ventures Private Limited v/s Principal...

Read More
Posted Under: Income Tax |

Amendment to Section 56(2)(x) & Section 50CA of Income Tax Act

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) […]...

Read More
Posted Under: Income Tax |

Valuation of Equity Share

Equity Valuation becomes easy when the script is listed, Company is active in business & shares are regularly trading. Since market price is ready available in stock exchange website. Further we can average out the daily closing market price of last one year to make it full proof, however it becomes challenge to value unlisted companies e...

Read More
Posted Under: Income Tax |

AO cannot change Share Valuation Method Opted by Assessee in Return

IBS Fintech India Pvt. Ltd Vs ITO (ITAT Bangalore)

The issue under consideration is whether AO in invoking section 56(2)(viib) of the Act and taxing the share premium under the said provisions?...

Read More

Benefits for start-ups under income tax act

Startup India is a flagship initiative of the Government of India which launched on 16th January, 2016, the Startup India Initiative has rolled out several programs with the objective of supporting entrepreneurs, building a robust startup ecosystem and transforming India into a country of job creators instead of job seekers. These program...

Read More
Posted Under: Income Tax |

Valuation of Unquoted Equity Shares Under Income Tax

[IN CASE OF ISSUE AND TRANSFER OF SHARES] When an owner of Unquoted equity shares(“Shares”) in a Company transfers the shares to any person, he is required to pay Capital Gain tax on the difference between the sale consideration received by him and the cost of acquisition of such shares (or the inflation indexed cost, [&hellip...

Read More
Posted Under: Income Tax |

Rule 11UAC Exemption from deeming provisions of section 56(2)(x)

Notification No. 40/2020-Income Tax [G.S.R. 421(E)] (29/06/2020)

Rule 11UAC Exemption from deeming provisions of section 56(2)(x)-Prescribed class of persons for the purpose of clause (XI) of the proviso to clause (x) of sub-section (2) of section 56- Income Tax Notification No. 40/2020 dated 29th June, 2020. MINISTRY OF FINANCE (Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES) Notification No. 4...

Read More

Angel Tax – A Saviour For Start-Ups

Before understanding the concept of an Angel Tax, let’s know, who is an Angel? Imagine a situation when you have a brilliant business idea but you do not have adequate funds to execute your idea and you look for different sources to fund your business idea. That’s where an investor comes in to rescue you […]...

Read More
Posted Under: Income Tax |

Valuation For Transfer of Shares From Resident To Non-Resident

Valuation refers to the process of determining the present value of the asset being valued. The need for valuation of shares arises while performing certain transactions such as issue of further shares in the form of Right shares, merger and acquisitions, transfer of undertaking, etc. Valuation is usually performed by Chartered Accountant...

Read More
Posted Under: Income Tax |

Section 50C of Income Tax Act, 1961- FAQs

Section 50C says that when an individual sells land or building or both at a consideration lower than the Stamp duty value adopted or assessable by authority, then the Stamp duty value adopted or assessable by authority of property would be deemed to be the sales consideration for computation of Capital Gain under section 48 of Income Tax...

Read More
Posted Under: Income Tax |

Allotment of Share at High Premium for Cash | Gift | Lifting of corporate veil | Section 56(2)(viia)

Vaani Estates Pvt. Ltd. Vs The ITO (ITAT Chennai)

Vaani Estates Pvt. Ltd. Vs ITO (ITAT Chennai) Provisions of Section 56(2)(viib) of the Act, cannot be invoked in the case of the assessee company because by virtue of cash being brought into the assessee company by Mrs. Sasikala Raghupathy for allotment of equity shares with unrealistic premium the benefit has only passed on to […]...

Read More

Interplay between Section 50C, 50CA, 43CA and 56(2) of Income Tax Act, 1961

Interplay between Section 50C, 50CA, 43CA and 56(2) of Income Tax Act, 1961 The above sections are meant for taxing the persons who are in the intention of selling the assets at a price less than stamp duty value / fair market value. The above said sections are drafted in a lucrative way to the […]...

Read More
Posted Under: Income Tax |

Tax on share premium received by closely held companies in excess of FMV

Issues that need to be addressed under clause (viib) of sub-section (2) of section 56: Cut off time to examine the status of Company: The status of company at the time of receipt of consideration is relevant and not its status at the time of allotment of shares. Hence, if the company was not closely held company at the time of receipt of...

Read More
Posted Under: Income Tax |

Taxation of Gifts received by an Individual/HUF

As per section 56(2)(vii) of Income Tax Act, gifts received by an individual or a hindu undivided family in the form of money or property (without consideration or with inadequate consideration) is taxable as income under the head Income from Other Sources provided such income falls under five categories mentioned below and such income do...

Read More
Posted Under: Income Tax | ,

Taxability of Share premium under Section 56(2)(viib)

13/2019 (05//0/3/20)

Taxability of Share premium under Section 56(2)(viib) of Income Tax Act, 1961 Section 56(2)(viib) of the Income Tax Act,1961 was introduced in the Finance Act 2012 which requires a Company (issuer), not being a company in which the public are substantially interested, to issue shares at Fair Market Value (FMV). Any consideration received...

Read More
Posted Under: Income Tax |

Exemption to Start Ups from provisions of Section 56(2)(viib)

13/2019

Exemption to Start Ups from the provisions of Sec 56(2)(viib) of IT Act,1961 Exemption has been given to Start Ups for the purpose of clause (viib) of sub-section (2) of section 56 of the Act. CBDT through Notification No. 13/2019 granted exemption to startup companies from angel tax w.e.f. 19.02.2019 if such companies fulfill the [&helli...

Read More
Posted Under: Income Tax |

Question of Deductibility of an Expenditure U/s. 57(iii) of Income Tax Act, 1961

The provisions of the Income-tax Act relating to allowances disclose that the expenditure or outgoing sought to be deducted should bear a character which has a connection with or relation to the particular activity which produces the income or constitutes its source....

Read More
Posted Under: Income Tax |

Buying or Selling Property below the Stamp Duty Value

In India buying or selling of properties (Land & Building) at a value lower than the stamp duty value is very much prevalent to save the Stamp Duty on registration, which causes loss of revenue to the Government. Loss is not of just Stamp Duty revenue but also of Income Tax revenue that is to be paid by assessee on Income under head Capit...

Read More
Posted Under: Income Tax |

Startup Registration With DPIIT, Section 80IAC & other tax exemption

In this Editorial the author shall elaborate the procedures for registration of an entity under ‘Startup India’, an initiative by the Government of India launched in January 2016. Through this scheme, the government is looking forward to driving sustainable economic development and enhance employment opportunities in India.  ...

Read More
Posted Under: Income Tax |

Brief notes on Income from other sources

As per section 56(2)(i), dividends are always taxed under this head. However, dividends from domestic company other than those covered by section 2(22)(e) are exempt from tax under section 10(34). Winnings from lotteries, crossword puzzles, races including horse races, card game and other game of any sort, gambling or betting of any form ...

Read More
Posted Under: Income Tax |

Taxation of Cash Transactions under Income Tax Act, 1961

Cash transactions seldom leave any trail and has always been a facilitator of black money. Whereas, electronic transactions ensure a clear money trail and make it very difficult for tax evaders. Government, in this regard, has from time to time bought in various provisions in order to restrict/discourage cash transactions and incentivise...

Read More
Posted Under: Income Tax |

Gifts – Income Tax Perspective

Gift is that thing which brings joy on anyone’s face. But at the same time it brings confusion in the mind of taxpayers as well since many people got confused as to which gift is taxable and which is exempt u/s 56(2)(X). Hence today I come up with this solution to your confusion....

Read More
Posted Under: Income Tax |

Formation of Start up in India | Definition & Tax Benefits

Start up is the policy measure of the government of India, Ministry of Commerce and Industry to give stimulus and boost to the Innovative Talents to set up the business. These start up needs to get registered with Department of Industrial Policy and Promotion (DIPP) which will grant them a certificate, if all the conditions […]...

Read More
Posted Under: Income Tax |

Applicability of Section 50C and Section 56(2)(x) / Section 56(2)(vii) of Income Tax Act, 1961 on Rural agricultural land

Applicability of Section 50C and Section 56(2)(x) / Section 56(2)(vii) of Income Tax Act, 1961 on Rural agricultural land Computation of Capital Gain is many times not free from ambiguity. Further, due care is required in cases of transactions of immovable property for a consideration, which is less than the stamp duty value of such [&hel...

Read More
Posted Under: Income Tax |

Taxability of Gift received by an individual or HUF with FAQs

Sum of money:-As per the provisions of the I-T Act, 1961 (the Act), any sum of money received by an individual or a Hindu undivided family in a particular financial year, without consideration, the aggregate value of which exceeds Rs 50,000 is taxable....

Read More
Posted Under: Income Tax |

Taxability of Gift received by an individual or HUF

Gift is usually used to convert black money into white money. To stop practice of converting black money into white money a section 56(2)(Vii) introduced by Finance Act , 2009 and amended by Finance act , 2010. This section deals with law of taxation of gift. The term “Gift” implies – any sum of money […]...

Read More
Posted Under: Income Tax |

Tax Implication of receiving Gifts

Gifts!! This word always brings smile not only on face of children but also the elder once. But at the same time we should keep in mind the tax implication on gifts. Hence today I am covering this topic in detail. Type of gifts and its taxation is as under: 1. Cash: If aggregate value […]...

Read More
Posted Under: Income Tax |

Taxability of Gifts – Some Interesting Issues

Article explains  Taxability of gift to minor, Taxability of gift to uncle by nephew, Whether gifts received from friends and relatives on the occasion of daughter’s marriage are exempt, Taxability of Gift of Car, Whether interest free loans can be charged to tax as sum of money received without consideration, Taxability of Gift from M...

Read More
Posted Under: Income Tax |

Income Tax on Gifts: Exemptions and computation

Receiving Gift indeed brings a cheerful smile on the face of the receiver, but if receiver gets to know that he has to pay tax thereon, the smiling face may turn sad. Although Gift Tax Act has been abolished, however there are certain provisions in the Income Tax Act, which make the gift taxable in […]...

Read More
Posted Under: Income Tax |

Section 51: Monies Forfeited Characterized with Income from Other Sources

Many times we observed in property transaction that buyer enter into the transaction paid advance money against the consideration and then after some time if something went wrong he cancelled the transaction. In such cases, generally seller of that property forfeit the advance money received by buyer. So if such situation occur how tax wi...

Read More
Posted Under: Income Tax |

Detailed Analysis- Gifts Taxation under Income Tax Act, 1961

Article explains Income Tax Treatment of Immovable Property Received as Gift Without Consideration or for Inadequate Consideration, Any property other than immovable property received Without consideration of For Inadequate Consideration and all those gifts which are fully exempt under Income Tax under Section 56(2)(X) 1. Cash: If aggrega...

Read More
Posted Under: Income Tax | ,

Nobel Prize and other Indian Awards are Tax Free?

Krishna, recently Indian resident Mr. Kailash Satyarthi received Nobel Peace Prize with Malala Yusufzai. This consists of a medal and approximately 6 crores and 64 lakh rupees. Is an Indian resident required to pay Income tax on this Prize money? And also please explain how Income tax is levied on Awards, Prizes, Rewards, etc....

Read More
Posted Under: Income Tax | ,

Share premium in excess of fair market value to be treated as income

It is proposed to insert a new clause in section 56(2). The new clause will apply where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares. In such a case if the consideration received for issue of shares e...

Read More
Posted Under: Income Tax | ,

Contradiction between valuation under section 56(2)(viib) vis-à-vis 56(2)(x)(c)

Section 56(2)(viib) requires a Company (issuer), not being a company in which the public are substantially interested, to issue shares at Fair Market Value (FMV). Any consideration received by such issuing Company in excess of the FMV, to the extent it exceeds the face value of such shall be liable to tax. For the purpose […]...

Read More
Posted Under: Income Tax |

Method To Calculate FMV of Unquoted Shares

The fair market value of the shares= (i) as may be determined in accordance with such method as may be prescribed, or (ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares...

Read More
Posted Under: Income Tax |

Tax Treatment of Gifts Received By an Individual or HUF

A very common and frequent question running in the mind of taxpayers is the tax ability of gifts. In this part, an effort has been made to discuss the various provisions relating to taxability of gift received by an individual or a Hindu Undivided Family (HUF) under Income Tax Act. 1. Monetary Gifts: If the […]...

Read More
Posted Under: Income Tax |

CBDT revises definition of unauthorised colonies of NCT of Delhi

Notification No. 12/2020-Income Tax [G.S.R. 124(E)] (17/02/2020)

CBDT has vide Notification No. 12/2020-Income Tax  revises definition of unauthorised colonies of NCT of Delhi for rule 11UAC read with Section Section 56(2)(x). Earlier CBDT has provided vide Notification No. 96/2019-Income Tax dated 11th November, 2019 that Section 56(2)(x)  not applies to specific immovable property transactions of s...

Read More

Increase in safe harbour limit of 5% u/s 43CA, 50C & 56 to 10%

Budget 2020- Increase in safe harbour limit of 5% u/s 43CA, 50C and 56 of the Income Tax Act to 10% Section 43CA of the Act, inter alia, provides that where the consideration declared to be received or accruing as a result of the transfer of land or building or both, is less than the […]...

Read More
Posted Under: Income Tax |

Dual taxation on transfer of immovable property – Sections 50C & 56(2)(x)(b)(B)

This article is a brief attempt to analyse two different provisions having similar impact on two different but connected assessees who amongst them have a relationship of buyer and seller of immovable property. The buyer gets taxed under the head Income from Other Sources while the seller is taxed under the head Capital Gains....

Read More
Posted Under: Income Tax |

CBDT notifies more modes of e-payments; 6DD limit reduced to ₹ 10000

Notification No. 08/2020-Income-Tax [G.S.R. 56(E)] (29/01/2020)

Notification No. 8/2020-Income-Tax- CBDT has notified Other electronic modes by inserting New Income TAx Rule 6ABBA. It also amended marginal heading of rule 6DD and in rule 6DD for the words ‘account payee bank draft, exceeds twenty thousand rupees’, the words, figures and letters ‘account payee bank draft or use of ele...

Read More

Section 56(2)(vii)(b) not applicable to Property Purchased before 01.04.2014

Bajrang Lal Naredi Vs ITO (ITAT Ranchi)

Bajrang Lal Naredi Vs ITO (ITAT Ranchi) In the instant appeal, the applicability of Section 56(2)(vii)(b) of the Act as amended by Finance Act, 2013 and applicable to AY 2014-15 in question. On a perusal of pre-amended provisions of Section 56(2)(vii)(b) of the Act, we gather that where an individual or HUF receives from any […]...

Read More

HRA: How to compute exemption

What is House Rent Allowance? Employees generally receive a house rent allowance (HRA) from their employers. This is a part of the salary package, in accordance with the terms and conditions of employment. HRA is given to meet the cost of a rented house taken by the employee for his stay....

Read More
Posted Under: Income Tax |

5 Important points related to Charitable / religious trusts

Finance Act’2017 had made some major changes relating to Charitable and religious trusts. In this Article we have discussed five major amendments which are affecting Charitable and religious trusts....

Read More
Posted Under: Income Tax |

List of relatives covered under Section 56(2) of Income Tax Act,1961

This article provides list of relatives covered Section 56(2)(VII) of the Income Tax Act,1961. As per Section 56(2)(VII) if any gift received from relative which are covered under following list will be exempt in the hands of receiver....

Read More
Posted Under: Income Tax |

Section 56(2)(viib) intends to tax unaccounted money received in garb of share premium

Clearview Healthcare P. Ltd Vs ITO (ITAT Delhi)

Clearview Healthcare P. Ltd Vs ITO (ITAT Delhi) There are two limbs in Section 56(2)(viib) of the Act. As per explanation to Section 56(2)(viib) of the Act, the first limb is valuation to be made as per the prescribed method. In fact, the method for valuation of shares is prescribed under Rule 11UA of the […]...

Read More
Posted Under: Income Tax | |

Tax on Gifts in India

Article explains Income Tax Treatment of Immovable Property Received as Gift Without Consideration or for Inadequate Consideration, Any property other than immovable property received Without consideration of For Inadequate Consideration, Gifts from Friends and Unrelated Persons, Gift from Relatives, Gifts Received at Wedding, Gift Receiv...

Read More
Posted Under: Income Tax |

Taxes on Gift

Income tax was not applicable on all gift received by a person until the financial year 2003-04. In 2004, changes were made to the Income Tax Act. Currently, any amount received by a person or HUF over Rs.50000/- in a year from any unrelated person, in cash or in kind, will be included as income....

Read More
Posted Under: Income Tax |

Section 56(2)(viia) not applies to a foreign company prior to 1.4.2019

Keva Industries Pvt. Ltd C/O. Vs ITO (ITAT Mumbai)

Keva Industries Pvt. Ltd Vs ITO (ITAT Mumbai) We find that there is no dispute that the assessee company had acquired the shares of a foreign company from its directors. We also find the provisions of section 56(2)(viia) of the Act refers to transaction of acquisition of any property being shares of a company not […]...

Read More

No addition if margin between value  given by assessee & Departmental Valuer was less than 10%

Geetika Sachdev Vs ITO (ITAT Delhi)

As margin between the value as given by the assessee and the Departmental Valuer was less than 10 percent and the difference is liable to be ignored and the addition made by the lower authorities on this count cannot be sustained...

Read More

Taxation of Share Transfer Due To IBC

There are issues that are still to be resolved in respect of interplay between income tax and IBC. One such issue that may arise in the future is taxation of the company acquired under the resolution process under section 56 i.e Income under Other Sources....

Read More
Posted Under: Income Tax |

Section 56(2)(viia) not applies on acquisition of shares of a foreign company as per rule 11U(b)(ii) prior to 01.04.2019

M/s. Keva Industries Pvt. Ltd Vs ITO (ITAT Mumbai)

Provisions of section 56(2)(viia) was not applicable on acquisition of shares of a foreign company from its directors  because as per rule 11U(b)(ii) (prior to 01.04.2019) which defines "balance sheet‟ was not applicable to a foreign company and the amendment to Rule 11U with effect from 1.4.19 was prospective in nature. If the computa...

Read More

Section 56(2)(vii) not applies to stock-in-trade

Shri Satendra Koushik Vs I.T.O. (ITAT Jaipur)

Provisions of section 56(2)(vii) have application to ‘property’ which is in nature of a capital asset of recipient and, thus, when assessee purchased a piece of land as stock-in-trade, the addition made by AO in respect of the purchase of land by invoking provisions of section 56(2)(vii)(b)(ii), was to be set aside....

Read More

Cabinet approves Taxation Laws (Amendment) Bill, 2019

In order to attract fresh investment in manufacturing and provide boost to 'Make-in India' initiative of the Government, another provision was inserted to the IT Act, to provide that a domestic manufacturing company set up on or after 1st October, 2019 and which commences manufacturing by 31st March, 2023, may opt to pay tax at 15% plus s...

Read More
Posted Under: Income Tax |

Income Tax Relief- Regularization of unauthorized colonies in Delhi

Post Union cabinet approved regularization of 1728 unauthorized colonies in National Capital Territory of Delhi with levy of 0.5% stamp duty (against Stamp duty and transfer duty @ 4% if the vendee is a woman and @ 6% if the vendee is a man), notification 96/2019 dated 11.11.19 provided relief under Income Tax. To curb cash dealings in...

Read More
Posted Under: Income Tax |

Section 56(2)(x) CBDT grants exemption to resident of unauthorised colony

Notification No. 96/2019-Income Tax [G.S.R. 836(E)] (11/11/2019)

Unauthorised colony means a colony or development comprising of a contiguous area, where no permission has been obtained for approval of layout plan or building plans and has been identified for regularisation of such colony...

Read More

Browse All Categories

CA, CS, CMA (5,053)
Company Law (6,720)
Custom Duty (8,087)
DGFT (4,389)
Excise Duty (4,411)
Fema / RBI (4,438)
Finance (4,699)
Income Tax (35,125)
SEBI (3,757)
Service Tax (3,627)

Search Posts by Date

December 2020
M T W T F S S
 123456
78910111213
14151617181920
21222324252627
28293031