Sec. 56 Trigger in 20+ Scenarios Impacting Corporates

Course Duration:
180 minutes (two episode of 90 minutes each)

Course Background:

India has been at the forefront in the battle against tax avoidance with Indian policy makers constantly strengthening the legal framework to counter mechanisms used for tax abuse & avoidance. A look back on the budget proposals of several years, showcases several significant measures taken by India, with the key anti-abuse and anti-avoidance amendments being GAAR, POEM, indirect transfer taxation, and introduction of Sec. 56(2)(viib) / 56(2)(x) provisions.

Particularly w.r.t Sec. 56(2)(viib)/Sec 56 (2)(x), it is worth recapitulating that Section 56(2)(viib) was introduced in the IT-Act, 1961 vide the Finance Act, 2012, seeking to tax any excess premium received by a closely held company upon the issue of shares. Likewise, Sec. 56(2)(x), introduced vide Finance Act, 2017, provides that where any person "receives" any specified "property" (which includes shares and securities) without consideration or for a consideration which is less than its Fair Market Value (Tax FMV), then, the excess of the Tax FMV over the consideration paid would be subject to tax in the hands of the recipient as "income from other sources". On a microscopic reading of the said provisions, one can safely infer that these provisions are so widely worded that practically every single corporate transaction has to be examined through the Sec. 56 lens in order to scrutinize its complete tax ramifications.  

Against this backdrop, Taxsutra in conjunction with Tax Wizard Gautam Doshi brings to you a unique module on, “Dissecting the Nuances of Anti-Abuse Provisions u/s. 56 – Glimpses of Corporate Tax Scenarios”.

What will the module cover ?

In this module, Mr. Doshi has dwelled on the said anti-abuse provisions contained in Sec. 56 and has discussed the raging controversies surrounding the same in the light of plethora of judicial precedents. Furthermore, the speaker has touched upon 20+ scenarios that may be susceptible to Sec. 56 trigger especially from an India Inc. perspective, while also deeply analysing each facet of the Valuation norms under Rule 11U/UA.

Few of these scenarios/issues that are discussed in the module include the following:

• Issue of bonus shares, Rights issue
• Conversion of debt / preference shares into equity shares
• Slump Sale / Exchange
• Share buy-backs and other group restructuring exercise
• Non-resident to Non-resident gifting of Indian company’s shares
• Gifting of foreign company’s shares
• Conversion of loan into equity, Loan waivers
• Conversion of Company into LLP, land transfer to LLP