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Startups, unlisted companies on black money radar, probe on 200 entities

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Startups, unlisted companies on black money radar, probe on 200 entities
Startups and unlisted subsidiaries of some major Indian companies and multinationals find themselves in the crosshairs of the income tax department for raising funds through preference shares in excess of what it considers the fair market value.

The investigation arm of the income tax department has sent notices to about 200 entities under Section 56(2)(vii)(b) of the Income Tax Act, 1961, in August, two people with direct knowledge of the matter told ET.

Fair market value is assessed by the tax department based on past transactions and the record of similar, comparable companies. The Section is often applied when it’s suspected that companies may be issuing shares at a premium over the fair value for laundering unaccounted cash.

“In cases where deals have been done at valuations higher than the fair value arrived at by tax authorities, queries have been raised,” said Abhishek Goenka, partner, corporate and international taxation, Pw ..

The Economic Times New Delhi, 07th September 2017

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