Amendment of section 56.
21. In section 56 of the Income-tax Act, in sub-section (2),—
(A) in clause (vii), in the Explanation, for clause (e), the following clause shall be substituted and shall be deemed to have been substituted with effect from the 1st day of October, 2009, namely:—
‘(e) “relative” means,—
(i) in case of an individual—
(A) spouse of the individual;
(B) brother or sister of the individual;
(C) brother or sister of the spouse of the individual;
(D) brother or sister of either of the parents of the individual;
(E) any lineal ascendant or descendant of the individual;
(F) any lineal ascendant or descendant of the spouse of the individual;
(G) spouse of the person referred to in items (B) to (F); and
(ii) in case of a Hindu undivided family, any member thereof;’;
(B) after clause (viia), the following shall be inserted with effect from the 1st day of April, 2013, namely:—
‘(viib) 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 that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares:
Provided that this clause shall not apply where the consideration for issue of shares is received by a venture capital undertaking from a venture capital company or a venture capital fund.
Explanation.—For the purposes of this clause,—
(a) the fair market value of the shares shall be the value—
(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, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, whichever is higher;
(b) “venture capital company”, “venture capital fund” and “venture capital undertaking” shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of Explanation 1 to clause (23FB) of section 10;’.
Notes on Clauses:
Clause 21 of the Bill seeks to amend section 56 of the Income-tax Act relating to income from other sources.
The existing provisions of clause (vii) of sub-section (2) of the aforesaid section 56, inter alia, provide that where any sum of money, the aggregate value of which exceeds fifty thousand rupees, is received without consideration, by an individual or a Hindu undivided family, in any previous year from any person on or after the 1st day of October, 2009, the whole of the aggregate value of such money shall be chargeable to income-tax under the head “Income from other sources”. The second proviso to the said clause provides that the provisions of this clause shall not apply to any sum of money or any property received from any relative. Clause (e) of Explanation to second proviso of the said clause provides that the definition of “relative” shall have the same meaning assigned to it in the Explanation to clause (vi) of sub-section (2) of the said section.
It is proposed to substitute the aforesaid clause (e) so as to provide that the definition of “relative” shall also include any sum or property received by a Hindu undivided family from its members apart from the persons referred to in the Explanation to clause (vi) of sub-section (2) of the said section.
This amendment will take effect retrospectively from 1st October, 2009.
It is proposed to insert a new clause (viib) in the aforesaid sub-section so as to provide that 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 that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be chargeable to income-tax under the head “Income from other sources”.
However, the said new clause shall not apply where the consideration for issue of shares is received by a venture capital undertaking from a venture capital company or a venture capital fund.
It is further proposed that the company receiving the consideration for issue of shares shall be provided an opportunity to substantiate its claim regarding the fair market value of the shares.
This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-2014 and subsequent assessment years.
