The Finance Act, 2012 inserted a new provision in the Income-tax Act which provides for taxability of money (in excess of the fair value of shares) received by a closely held company on issue of its shares to a person other than non residents. However at that time, no method was prescribed by the Act for arriving at the fair value of the shares. The Central Board of Direct Taxes (CBDT) has recently issued a Notification on 29th November, 2012 prescribing the method for arriving at the fair value of such shares by way of amendment in the Income Tax Rules 11U and 11UA. The said Notification has also made certain other amendments in the Income Tax Rules 11U and 11UA dealing with the valuation of movable assets in case of gifts received by an Individual or an HUF from non relatives or by a firm or Private Limited companies in some specified circumstances. The attached SKP Tax Alert discusses this Notification.
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