Applicability of Section 56(2)(x) on Share received through Right Issue

[SUDHIRKUMAR SHAH]

Mr. X received 25000 shares of M/s ABC Private Limited at a face value of ₹ 100/- per share through right issue offer. The FMV of unquoted share of the company as on the date of issue is ₹ 200/-. per share. Whether Mr.X is required to pay tax on amount of ₹ 25,00,000/- (25000 shares x100) being benefit he received through right issue u/s.56(2)(x) of Income Tax Act ?

AI Summary

Tax Implications of Right Issue: Is Section 56(2)(x) Applicable on Shares Below Market Value? A query was raised regarding the applicability of Section 56(2)(x) of the Income Tax Act on shares received through a right issue. An individual received 25,000 shares of a private company at a face value of 100 per share, while the fair market value was 200 per share. The question is whether the individual must pay tax on the 25,00,000 benefit received through the right issue under this section of the Income Tax Act.