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CS Professional · Corporate Restructuring, Valuation and Insolvency · Taxation and Stamp Duty Aspects of Corporate Restructuring

Orion Ltd transfers unquoted equity shares of a private company, which it held as a capital asset, for ₹40,00,000. The fair market value determined in the prescribed manner is ₹55,00,000. Orion is not within any prescribed class of exempt transferors. Which is correct under the Income-tax Act, 2025?

The full value of consideration is ₹55,00,000. Under section 79, when a non-quoted share is transferred for less than its fair market value determined in the prescribed manner, that value is deemed to be the consideration. The 110% tolerance applies only to land and building.

  1. A₹40,00,000, because the 110% tolerance applies to shares too
  2. B₹55,00,000, because the fair market value is deemed to be the full value of consideration under section 79Correct
  3. C₹15,00,000, being the shortfall
  4. D₹47,50,000, being the mean of price and fair market value

Explanation

Section 79(1) deems the prescribed-manner fair market value to be the full value of consideration where consideration for a non-quoted share is less than that value. The 110% tolerance is in section 78 for land and building, not in section 79. Hence ₹55,00,000 applies.

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