Changes Proposed by Finance Bill, 2012: Is Corporate Gift of Shares Taxable Now?

Abstract

An earlier version of this paper can be found at http://ssrn.com/abstract=1997835

This author in the article titled as ‘Taxability of Corporate Gift of Shares’ had examined the ruling of AAR in Dana Corporation, In Re and others. In those rulings the AAR had inter alia held that no capital gains implications arose in case of gift of shares of subsidiary by holding company as ‘consideration’ in such cases of transfer could not be computed. This author in the said article had also commented that this position required to be considered by the legislature as it was leading to avoidance of tax and the interpretation was leading to absurdity. The Government, in the Budget for 2012-13 has reconciled and sought to cure this anomaly. In this article the author examines whether the proposals made in the recently presented Budget actually cater to the issue.

Keywords: gift, shares, tax, corporate gift, India, Finance Bill 2012

JEL Classification: H25, H26, H29, K34