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VALUATION OF BUY-BACK PRICE

Posted @ May 1, 2013, 10:33 am under (Valuation Services)

 

VALUATION OF BUY-BACK PRICE OF SHARE
 
 
 
The Central Board of Direct Taxes ( CBDT) had prescribed Rules 11U and 11UA under the Income Tax Rules, 1962 (the Rules) for arriving a fair market value.
 
 
 
Rule 11UA prescribes the following basic formula to arrive at the FMV of equity shares of an unlisted closely held company:
 
 FMV = (book value of assets less book value of liabilities) × paid-up value of equity shares to be issued
 
Paid up equity share capital as it is appearing in books
 
 
 
For the purpose of above formula the book value of assets would include only those items that actually represent the value of any asset.
 
 
 
Any amount shown as the unamortized amount of any deferred expenditure would not be included while calculating the book value of asset.
 
 
 
Similarly, for the purpose of above formula, the book value of liabilities would exclude the amount of provision for taxation which is in excess of tax payable on book profits (other than any tax paid as deduction/collection or advance tax as reduced by claim of refund under the Act);
 
 Note:
 
There is no Stamp Duty is payable in case of buy back of shares and transfer of shares in case of company.

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