taxability on transfer of unquoted equity shares as capital contribution to partnership firm

[BINDLAS DUPLUX]

dear all

one of my client want to contribute unquoted equity shares as an capital contribution to partnership firm to become partner.

he has some equity shares of which book value is rs. 10 lac as per aud. b. sheet on 31/03/2018, he want to contribute shares as capital contribution in partnership firm at less than book value and want to become partner.

whether sect. 56 of income tax act attract that he cannot trf. the shares below book value of that company as capital contribution to partnership firm?

[KASTURI SETHI]

Contact Grievances Redressal Cell. They will set Common Portal System as per order of the Deputy Commissioner. Such problems are solved immediately.

[Shrivats Pandey]

Sir kindly explain whom to contact as the grievance cell as told me to that they will tell the procedure to revocate the gstin cancellation

[DR.MARIAPPAN GOVINDARAJAN]

If the amount contributed is more than ₹ 50,000/- section 56 of the Income Tax Act would attract.

[BINDLAS DUPLUX]

thanks Govindrajan sir

Ok, i agree that sec. 56 will attract on firm,

but in the hands of partner,

> sec. 45(3) says that the full value of consideration for the purpose of sec. 48 will be the value at which the firm recorded in its books of accounts,

> but as per sec. 50CA says that the full value of consideration for the purpose of sec. 48 will be the fair market value.

which deeming fiction will be applied? that is the confusion.

AI Summary

Tax Implications of Contributing Unquoted Equity Shares to Partnership: Section 56 and Valuation Confusion Explained A client intends to contribute unquoted equity shares as capital to a partnership firm at a value below their book value to become a partner. Concerns were raised about whether Section 56 of the Income Tax Act would prevent transferring shares below book value. Responses included contacting the Grievances Redressal Cell for procedural guidance. Another response clarified that if the contribution exceeds 50,000, Section 56 applies. Additionally, there was confusion regarding which valuation-book value or fair market value-should be considered under Sections 45(3) and 50CA for tax purposes.