Section 68 — Capital gains on distribution of assets by companies in liquidation
Old Act equivalent: Section 46 of IT Act 1961 Sub-part: E.—Capital gains
Statutory Text
(1) Irrespective of anything contained in section 67, where the assets of a company are distributed to its shareholders on its liquidation, such distribution shall not be regarded as a transfer by the company for the purposes of the said section. (2) If a shareholder, on the liquidation of a company, receives any money or other assets from the company, then,— (a) such shareholder shall be chargeable to income-tax under the head “Capital gains”, in respect of the money so received or the market value of the other assets on the date of distribution, as reduced by the amount assessed as dividend within the meaning of section 2(40)(c); and (b) the sum so arrived at shall be deemed to be the full value of the consideration for the purposes of section 72. Capital gains on purchase by company of its own shares or other specified securities.
Sub-sections
Sub-section (1)
Irrespective of anything contained in section 67, where the assets of a company are distributed to its shareholders on its liquidation, such distribution shall not be regarded as a transfer by the company for the purposes of the said section.
Sub-section (2)
If a shareholder, on the liquidation of a company, receives any money or other assets from the company, then,— (a) such shareholder shall be chargeable to income-tax under the head “Capital gains”, in respect of the money so received or the market value of the other assets on the date of distribution, as reduced by the amount assessed as dividend within the meaning of section 2(40)(c); and (b) the sum so arrived at shall be deemed to be the full value of the consideration for the purposes of section 72. Capital gains on purchase by company of its own shares or other specified securities.
Provisos
None.
Explanations
None.
Tables
None.
Key Structure
- Applies to: Companies distributing assets on liquidation (sub-section 1) and shareholders receiving money or other assets from a company on its liquidation (sub-section 2).
- Asset type: Capital assets distributed by a company on liquidation; money or other assets received by a shareholder on liquidation.
- Conditions: The company must be in liquidation; distribution of assets by the company is not regarded as a transfer by the company; the shareholder is chargeable on the money received or market value of other assets on the date of distribution, reduced by the amount assessed as dividend under section 2(40)(c).
- Time limits: None specified in this section.
- Monetary limits: None specified in this section.
- Exceptions: Distribution by the company itself is not treated as a transfer for the purposes of section 67; only the shareholder is chargeable on receipt.
Cross-References
- s067-charging — section 67 is disapplied for the distributing company under sub-section (1); provides the general charging provision for capital gains.
- s072-computation — section 72 governs computation; the sum arrived at under sub-section (2) is deemed full value of consideration for section 72 purposes.
- Section 2(40)(c) (not yet ingested) — definition of dividend; amount assessed as dividend is deducted from the shareholder’s capital gains computation.
Amendment Notes
None noted from the extracted pages.