Sec. 2(19)AA(iv): To qualify as demerger one of the conditions is that the resulting company, as consideration for demerger, issues its shares to the shareholder of the demerged company in proportionate basis. An amendment is to be made w.e.f 1st April, 2013, which provides that where the resulting company itself is the shareholder of the demerged company, there is no need to issue shares. Therefore, it shall not be necessary for the resulting company to issue shares to itself.
Transactions not regarded as transfer: Sec. 47(vii)(a)
Under the current provision, in order for a merger to qualify as a tax free merger, it is required that shares have to be issued by the resulting entity to the shareholders of the merging entity. A proposed amendment to the current Sec. 47(vii) states that if the amalgamated company is itself the shareholder of the amalgamating company, then there is no requirement for the amalgamated company to issue shares to itself.
INCOME FROM OTHER SOURCES :Sec. 56(2)
Sec. 56(2)(vii): The current provisions provide that where an individual or a HUF receives a sum or asset, without consideration, the value of which exceeds Rs.50,000/- then such sum shall be treated as income from other sources and taxable in the hands of the donee.
However, there is an exception where the sum or asset is gifted by a relative of the individual or HUF, as defined by the said section. The meaning of relative‟ has been extended by a proposed amendment whereby individual member of the HUF will be included within the ambit of relative of the receiving HUF. Therefore, if a member gives a gift to the HUF there shall be no tax on such gift under the head income from other sources. However, if the HUF makes a gift to the individual the same shall not be tax exempt as an HUF will not be treated as a relative of its individual members.
Share premium in excess of FMV of share treated as Income from other sources:
Sec. 56(2)(viib):A key tax proposal relating to curbing tax avoidance has been made in relation to issue of shares in excess of the fair value by closely held companies. Share premium received by private company or unlisted Company over the "fair market value" on subscription of shares is proposed to be taxable as income from other sources in the hands of the issuer company.
However, there is an exception for consideration for issue of shares received by a venture capital undertaking from a venture capital company or fund.
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