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03/09/2025
Recommendations of the 56th Meeting of the GST Council held at New Delhi
GST Council approves two-tier tax structure of 5% and 18%
CCI approves acquisition of certain share capital & voting rights of YES Bank by SMBC
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CBDT eases black money rules, revises exemption threshold from Rs. 5 lakh to Rs. 20 lakh
ICAI Postponed CA Inter & Final Exams Scheduled to be held on 3rd and 4th Sept 2025
01/09/2025
Monthly GST Collections Report – August 2025
Audit committees need to ensure independence of auditors - NFRA
28/08/2025
SEBI Flags Gaps in Corporate Disclosures
27/08/2025
CBIC Urges against Speculation on GST Rates
Draft Rules for new Income Tax Act expected by year end - CBDT
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23/08/2025
ED arrests auditor in Falcon invoice scam worth Rs.792 Cr
 
 
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26/08/2025
Implementation of Section 51A of UAPA, 1967: Updates to UNSC’s 1267/1989 ISIL (Da'esh) & Al-Qaida Sanctions List: Amendments to 05 Entries
16/08/2025
Reserve Bank of India (Know Your Customer (KYC)) (2nd Amendment) Directions, 2025
Compliance with Hon’ble Supreme Court Order dated April 30, 2025 in the matter of Pragya Prasun and Ors. vs Union of India (W.P.(C) 289 of 2024) and Amar Jain vs Union of India & Ors. (W.P.(C) 49 of 2025)
14/08/2025
Introduction of Continuous Clearing and Settlement on Realisation in Cheque Truncation System
Investment in Government Securities by Persons Resident Outside India through Special Rupee Vostro account
06/08/2025
Reserve Bank of India (Non-Fund Based Credit Facilities) Directions, 2025
Reserve Bank of India (Co-Lending Arrangements) Directions, 2025
International Trade Settlement in Indian Rupees (INR)
29/07/2025
Reserve Bank of India (Investment in AIF) Directions, 2025
Relaxation of time limit for processing of ITR filed electronically which were incorrectly invalidated by CPC
Article Details
Section 56(2) (viia) of the Income Tax Act, 1961
Section 56(2) (viia) of the Income Tax Act, 1961 talks about transfer of shares of a closely held company.
This section is applicable if the following conditions are satisfied:
1. Recipient is a firm or a closely held company (a closely held company is a company in which the public are not substantially interested i.e. companies other than listed company)
2. The asset which is received is in the form of shares in a closely held company.
3. These shares are received from any person i.e. company, HUF, individual, firm etc.
4. Such shares are received without consideration or for an inadequate consideration.
 
If this condition are fulfilled then the difference between the fair value of the shares & the value at which the shares are transferred will be taxable in the hands of the recipient.
If we take an example in this case:
Suppose “X” ltd is a public limited company which is not listed (i.e. public are not substantially interested in this company). Another company “Y” ltd. purchase 5000 shares of “X” ltd from Mr. Z at Rs. 15 per share. The fair value (as calculated) of the shares of “X” ltd is Rs. 30.
In this case Rs 75000 (i.e. 30-15*5000) will straight away be taxable in the hands of Y ltd. ,since it has purchased the shares of an unlisted company (X” ltd.)  at a price lower than the fair value of the shares.
Thus we can conclude:
1. That the company whose shares are sold should be an unlisted company private or public & the person purchasing the shares should also be an unlisted company private or public.
2. This clause will not be applicable in case the shares if sold are more than the fair value of the shares. In this example if the shares of “X” ltd are sold more than Rs. 30 then this clause will not be applicable.
3. This clause is not applicable if the shares of a listed company are sold.
4. This clause is also not applicable if the shares are purchased by a listed company.