| Question And Answer | |
|---|---|
| Subject: | Rule 11UA – liability not provided in Books |
| Category: | Income-Tax |
| Querist: | Deepali shah |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | rule 11UA, sale of shares |
| Date: | March 21, 2022 |
Assessee is pvt limited co . One of the share holder is interested in purchase of shares of another share holder. Whether he can purchase the shares at the face value? Or at the price ignoring the market vlaue of rights in immovable property? Whether valuation report as per Rule. 11UA is mandatory? Whether liability which may require for the claim on the rights in immovable property can be consider while working of value of share can be consider even if not recorded in books of accounts ?
pl guide .
A shareholder selling his share to another shareholder below the Fair Market value will attract section 56(2)(x) of the Income-tax Act, 1961. He would be required to justify his selling price with a valuation report. Valuation under Rule 11UA has to be done as per Net Asset Value (NAV) or Discounted Cash Flow (DCF) Method. It would be difficult to consider a liability which is not in the books for the purpose of computing value of share as per NAV method.