CBDT amends Rule 11UAC to exempt from Section 56(2)(x): CBDT vide Notification No. 40/2020 dated 29.06.2020 further amended Rule 11UAC of the Income Tax Rules, 1962 to provide an exemption from applicability of the provisions of section 56(2)(x) in the case of NCLT approved resolution plans and Yes Bank Reconstruction scheme.
Section 56(2)(x) is a special provision which provides for taxability of receipt of following properties in the hands of the recipient of such property for inadequate consideration or inadequate consideration-
(i) money
(ii) any immovable property
(iii) any movable property including quoted and unquoted shares.
A margin of Rs. 50,000 is provided for non-applicability of section 56(2)(x).
Further certain exemptions have been provided whereby receipt of such property even for no consideration shall not be taxable in the hands of the recipient. These are provided by way of 11 provisos to section 56(2)(x). In this respect, proviso XI provides for non-applicability of section 56(2)(x) for receipt of any of the above-mentioned property from such class of persons and subject to such conditions, as may be prescribed. Finance (No. 2|) Act, 2019 empowered the CBDT to notify such transfers for no or inadequate consideration to which provisions of section 56(2)(x) shall not apply.
Also Read CBDT Notification for Section 50CA for similar matter
In this regard, CBDT has now issued Notification No. 40/2020 on 29.06.2020 to exclude the following transfers and receipt of property in the given circumstances from the provisions of section 56(2)(x)-
(1) any immovable property, being land or building or both, received by a resident of an unauthorised colony in the National Capital Territory of Delhi, where the Central Government by notification in the Official Gazette, regularised the transactions of such immovable property.
(2) any movable property, being unquoted shares, of a company and its subsidiary and the subsidiary of such subsidiary received by a shareholder, where,—
(i) Where the National Company Law Tribunal (NCLT) has suspended the Board of Directors of such company and has appointed new directors nominated by the Central Government u/s 241 and u/s 242 of the Companies Act, 2013 (which deals with Oppression & Mismanagement) and
(ii) share of the company and its subsidiary and the subsidiary of such subsidiary has been received pursuant to a resolution plan approved by the NCLT u/s 242 of the Companies Act, 2013 after affording a reasonable opportunity of being heard to the jurisdictional Principal Commissioner or Commissioner.
(3) equity shares of the reconstructed Yes Bank Limited received by the investor or the investor bank at a price specified in the Yes Bank Limited Reconstruction Scheme, 2020.
Download Copy of Notification No. 40/2020 dated 29.06.2020 on Section 56(2)(x) in pdf format.
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