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

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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?

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.