merger of companiies

[satbir singhwahi]

x ltd is holding 99% shares of y pvt ltd, and y pvt ltd is having share capital 10 lacs and share premium 190 lacs and 200 lacs in bank.whether on merger of two companies, whether share premium will be taxable under IT Act,1961

[Rama Krishana]

What is the nature of share premium of Rs. 190 lacs? whether this amount has been collected while issuing shares capital of Rs. 10 lacs? If the answer is yes, I don't think that this amount would be taxable. But, before any other discussion, kindly elaborate your cause of concern that has created query in you mind about taxability of such transaction upon merger.

AI Summary

Share premium taxability: clarify origin of premium; premium on issue of shares is unlikely taxable on merger. Query whether share premium credited on issue of shares will be taxable on merger when the parent holds the majority stake; respondent asks for factual clarification on the nature and origin of the premium and indicates that premium received on issue of shares is unlikely to be taxable, requesting further details to determine tax characterisation in the merger context.