Income Tax 16th amendment Rules, 2021: 11UAE.Computation of Fair Market Value of Capital Assets for the purposes of section 50B of the Income-tax Act

Income Tax 16th amendment Rules, 2021: 11UAE.Computation of Fair Market Value of Capital Assets for the purposes of section 50B of the Income-tax Act

 MINISTRY OF FINANCE

(Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION

New Delhi, the 24th May, 2021

G.S.R. 338 (E).— In exercise of the powers conferred by section 50B read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules,1962, namely:─

Income Tax 16th amendment Rules, 2021

1. Short title and commencement.-

(1) These rules may be called the Income- tax (16th  Amendment) Rules, 2021.

2. In the Income-tax Rules, 1962, after rule 11UAD, the following rule shall be inserted, namely: —

“11UAE.Computation of Fair Market Value of Capital Assets for the purposes of section 50B of the Income-tax Act.

(1) For the purpose of clause (ii) of sub-section (2) of section 50B, the fair market value of the capital assets shall be the FMV1 determined under sub-rule (2) or FMV2 determined under sub-rule (3), whichever is higher.

(2) The FMV1 shall be the fair market value of the capital assets transferred by way of slump sale determined in accordance with the formula –

A+B+C+D - L, where, A= book value of all the assets (other than jewellery, artistic work, shares, securities and immovable property) as appearing in the books of accounts of the undertaking or the division transferred by way of slump sale as reduced by the following amount which relate to such undertaking or the division, —

(i) any amount of income-tax paid, if any, less the amount of income-tax refund claimed, if any; and

(ii) any  amount  shown  as  asset  including  the  unamortised  amount  of  deferred  expenditure  which  does  not represent the value of any asset;

B = the price which the jewellery and artistic work would fetch if sold in the open market on the basis of the valuation report obtained from a registered valuer;

C = fair market value  of shares and securities as determined in the  manner provided in sub-rule (1) of rule 11UA;

D = the value adopted or assessed or assessable by any authority of the Government for the purpose of payment of stamp duty in respect of the immovable property;

L= book value of liabilities as appearing in the books of accounts of the undertaking or the division transferred by way of slump sale, but not including the following amounts which relates to such undertaking or division, namely: —

(i) the paid-up capital in respect of equity shares;

(ii) the amount set apart for payment of dividends on preference shares and equity shares where such dividends have not been declared before the date of transfer at a general body meeting of the company;

(iii) reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation;

(iv) any amount representing provision for taxation, other than amount of  income-tax  paid,  if  any,  less  the amount of income-tax claimed as refund, if any, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto;

(v) any amount representing provisions made for meeting liabilities, other than ascertained liabilities;

(vi) any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares.

(3) FMV2 shall be the fair market value of the consideration received or accruing as a result of transfer by way of slump sale determined in accordance with the formula-

E+F+G+H, where,

E = value of the monetary consideration received or accruing as a result of the transfer;

F = fair market value of non-monetary consideration received or accruing as a result of the transfer represented by property referred to in sub-rule (1) of rule 11UA determined in the manner provided in sub-rule (1) of rule 11UA for the property covered in that sub-rule;

G = the price which the non-monetary consideration received or accruing as a result of the transfer represented by property, other than immovable property, which is not referred to in sub-rule (1) of rule 11UA would fetch if sold in the open market on the basis of the valuation report obtained from a registered valuer, in respect of property;

H = the value adopted or assessed or assessable by any authority of the Government for the purpose of payment of stamp duty in respect of the immovable property in case the non-monetary consideration received or accruing as a result of the transfer is represented by the immovable property.

(4) The fair market value of the capital assets under sub-rule (2) and sub-rule (3) shall be determined on the date of slump sale and for this purpose valuation date referred to in rule 11UA shall also mean the date of slump sale.

Explanation.  -For  the  purposes  of this  rule, the  expression "registered  valuer"  and "securities" shall  have  the same meanings as respectively assigned to them in rule 11U.”.

[Notification No.68/2021/F. No.370142/16 /2021-TPL]
KAMLESH CHANDRA VARSHNEY, Jt. Secy.
(Tax Policy and Legislation)

Note: The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, sub-section (ii) vide number. S.O. 969 (E), dated the 26th March, 1962 and last amended vide notification number G.S.R. 320(E) dated 5th May, 2021.

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