Section 11UA(2) in Income Tax Rules, 1962

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Union of India - Subsection

Section 11UA(2) in Income Tax Rules, 1962

(2)Notwithstanding anything contained in sub-clause (b) of clause (c) of sub-rule (1), the fair market value of unquoted equity shares for the purposes of sub-clause (i) of clause (a) of Explanation to clause (viib) of sub-section (2) of section 56 shall be the value, on the valuation date, of such unquoted equity shares as determined in the following manner under clause (a) or clause (b), at the option of the assessee, namely:-

(a) the fair market value of unquoted equity shares =| (A-L)(PE)| x (PV)

where,A=book value of the assets in the balance-sheet as reduced by any amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act and any amount shown in the balance-sheet as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset;L=book value of liabilities shown in the balance-sheet, but not including the following amounts, 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 tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act, 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;

PE=total amount of paid up equity share capital as shown in the balance-sheet;PV=the paid up value of such equity shares; or

(b)the fair market value of the unquoted equity shares determined by a merchant banker [***] [Words ] as per the Discounted Free Cash Flow method.

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Union of India - Subsection

Section 11UA(2) in Income Tax Rules, 1962