Shares received by an individual or HUF as a consequence of demerger or amalgamation of a company or a business reorganisation of a co-operative bank not to be subject to tax by virtue of section 56(2)(vii) :

Effective from: A.Y.2017-18

(i) Under section 56(2)(vii), any money, immovable property or other property received without consideration is chargeable to tax, if aggregate sum received by an assessee, being an individual or an Hindu undivided family (HUF), is in excess of ` 50,000. Likewise, if immovable or other property is received by an individual or HUF for inadequate consideration, and the difference between the stamp duty value (in case of immovable property) or the fair market value (in case of other property) exceeds ` 50,000, such difference is chargeable to tax under section 56(2)(vii).

(ii) Since the definition of “property” for the purpose of section 56(2)(vii) includes capital asset being shares and securities, the taxability provisions thereunder are attracted in a case where shares of a company are received as a consequence of demerger or amalgamation of a company.

(iii) Such a transaction is not regarded as transfer where the recipient is a firm or a company, not being a company in which public are substantially interested, on account of a specific exemption provided in the proviso to section 56(2)(viia), where shares are received as a consequence of demerger or amalgamation of a company.

(iv) In order to ensure uniformity in tax treatment, it is proposed to amend the second proviso of section 56(2)(vii) which provides for cases where the taxability provisions under the section would not be attracted.

(v) Accordingly, clause (h) has been inserted in the second proviso to section 56(2)(vii) to provide that any shares received by an individual or HUF as a consequence of demerger or amalgamation of a company or business reorganisation of a cooperative
bank shall not be subject to tax by virtue of the provisions contained in section 56(2)(vii).