(a) whether the Government propose to tighten the anti-abuse
provisions in the Income Tax Act in respect of transfer of shares
below the market value and also the cross border transfer of
shares below market value among unlisted companies; and
(b) the reasons for this line of action alongwith the details
thereof?
MINISTER OF STATE IN THE MINISTRY OF FINANCE:(SHRI S.S. PALANIMANICKAM)
(a) Yes Sir, the government proposes to tighten the anti-abuse
provisions in the Income Tax Act.
(b) In the Finance Bill, 2010 it is proposed to amend the
provisions of section 56(2) which in its present form applies to
receipt of undervalued property by an Individual and HUF only. This
allows scope to escape the rigours of section 56(2) through easily
controlled entities. In order to prevent the practice of transferring
unlisted shares at prices much below their fair market value, it is
proposed to include transactions undertaken in shares of a company
(not being a company in which public are substantially interested)
either for inadequate consideration or without consideration where
the recipient is a firm or a company (not being a company in which
public are substantially interested) within the ambit of
section 56(2). The necessary safeguards have been provided by
excluding the genuine transactions undertaken for business
reorganization, amalgamation and demerger from the scope of
proposed amendment.