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

Taxation of Discounted Shares under section 56(2)(x): whether shares issued below fair market value attract taxable benefit. Applicability of Section 56(2)(x) to shares received under a rights issue where the issue price is below the contemporaneous fair market value: whether the shortfall between issue price and fair market value of unquoted shares constitutes a taxable benefit under the provision when shares are allotted on preferential terms.