Section 56(2)(viib) - Shares issued on premium by a closely held company

• This clause is applicable when a closely held company issues shares to a resident person on premium.

• In such a case, (Issue Price - FMV) shall be taxable under IFOS in the hands of the company.

• This clause shall not apply if the consideration for such shares is received:

• by a venture capital undertaking from a venture capital company or a venture capital fund or a specified fund

• by a company from a class or classes of persons as may be notified by the CG.

• For the purposes of this clause. the fair market value of the shares shall be higher of the following values:

• as may be determined in accordance with such method as may be prescribed

• as may be substantiated by the company to the satisfaction of AO, based on the value on the date of issue of shares.

• For the purposes of this clause, closely held company means a company in which the public are not substantially interested.