Section 5. Unquoted equity shares in companies other than investment companies

5. Unquoted equity shares in companies other than investment companies. — (1) The value of an unquoted equity share in any company, other than an investment company, shall be determined in the manner set out in sub-rule (2). (2) The value of all the liabilities as shown in the balance sheet of such company shall be deducted from the value of all its assets shown in that balance sheet; the net amount so arrived at shall be divided by the total amount of its paid-up equity share capital as shown in the balance sheet ; the result multiplied by the paid-up value of each equity share shall be in the break-up value of each unquoted equity share, and an amount equal to eighty per cent. of the break-up value so determined shall be the value of the unquoted equity share for the purposes of this Act. (3) For the purposes of sub-rule (2),— (a) the following amounts shown as assets in the balance sheet shall not be treated as assets, namely :— (i) any amount paid as advance tax under the Income-tax Act; (ii) any amount shown in the balance sheet including the debit balance of the profit and loss account or the profit and loss appropriation account which does not represent the value of any asset ; (b) the following amounts shown as liabilities in the balance sheet shall not be treated as liabilities, 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 on which the gift was made at a general body meeting of the company ; (iii) reserves, by whatever name called, other than those set apart towards depreciation ; (iv) credit balance of the profit and loss account ; (v) any amount representing provision for taxation, other than the amount referred to in sub-clause (i) of clause (a), to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto; (vi) any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares. Explanation. —For the purposes of this rule, "balance sheet", in relation to any company, means the balance sheet of such company (including the Notes annexed thereto and forming part of the accounts) as drawn up on the date on which the gift was made and, where there is no such balance sheet, the balance sheet drawn up on a date immediately preceding that date, and, in the absence of both, the balance sheet drawn up on a date immediately after the date on which the gift was made. (c) "relative" has the meaning assigned to it in clause (41) of section 2 of the Income-tax Act; (d) "resident of India" shall have the meaning assigned to it in the Income-tax Act;] (iid) being a citizen of India or a person of Indian origin, who is not resident in India, to any relative of such person in India of property in the form of[1] [any foreign exchange asset as defined in clause (b) of section 115C of the Income-tax Act];] 2[(iie) being an individual who is a non-resident Indian, once out of the moneys standing to his credit in an account opened and operated in accordance with the Non-resident (Non-repatriable) Rupee Deposit Scheme, 1992. Explanation. —For the purposes of this clause, "non-resident Indian" shall have the meaning assigned to it in clause (e) of section 115C of the Income-tax Act;] (iii) of property in the form of savings certificates issued by the Central Government, which that Government, by notification in the Official Gazette exempts from gift-tax; 3* * * * * 4[(iiib) of property in the form of Special Bearer Bonds, 1991;] 5[(iiic) 6[being an individual or a Hindu undivided family, of property in the form of such Capital Investment Bonds] as the Central Government may, by notification in the Official Gazette, specify in this behalf subject to a maximum of rupees ten lakhs in value in the aggregate in one or more previous years : Provided that the exemption conferred by this clause shall be available only to a person who has initially subscribed to the said bonds;] 7[(iiid) being an individual or a Hindu undivided family, of property in the form of such Relief Bonds, as the Central Government may, by notification in the Official Gazette, specify in this behalf subject to a maximum of rupees five lakhs in value in the aggregate in one or more previous years : Provided that the exemption conferred by this clause shall be available only to a person who has initially subscribed to the said Bonds;] 8[(iiie) being an individual who is a non-resident Indian, 9[of property in the form of the bonds specified under sub-clause (iid) of clause (15) of section 10 of the Income-tax Act: Provided that] where an individual, who is a non-resident Indian in any previous year in which the bonds are acquired, becomes a resident in India in any subsequent year, the provisions of this clause shall apply in respect of the gifts of property referred to in this clause in such subsequent year or any year thereafter. 1. Subs. by Act 12 of 1983, s. 42, for certain words (w.e.f. 1-4-1984). 2. Ins. by Act 38 of 1993, s. 41 (w.e.f. 1-4-1993). 3. Clause (iiia) omitted by Act 23 of 1986, s. 42 (w.e.f. 1-4-1987). 4. Ins. by Act 7 of 1981, s. 7 (w.e.f. 12-1-1981). 5. Ins. by Act 14 of 1982, s. 38 (w.e.f. 1-4-1983). 6. Subs. by Act 12 of 1983, s. 42 for "of property in the form of such Capital Investment Bonds" (w.e.f. 1-4-1983). 7. Ins. by Act 26 of 1988, s. 67 (w.e.f. 1-4-1988). 8. Ins. by Act 3 of 1989, s. 80 (w.e.f. 1-4-1989). 9. Subs. by Act 49 of 1991, s. 85, for certain words (w.e.f. 1-4-1991). Explanation. —For the purposes of this clause, the expressions— 1* * * * * (b) "non-resident Indian" shall have the meaning assigned to it in clause (e) of section 115C of the Income-tax Act;] (iv) to the Government or any local authority[2] [or any authority referred to in clause (20A) of section 10 of the Income-tax Act ;] (v) to any institution or fund established[3] [or deemed to be established] for a charitable purpose to which the provisions of[4] [section 80G] of the Income-tax Act apply ; 5[(va) (i) to such temple, mosque, gurdwara, church or other place as has been notified by the Central Government for the purposes of[6] [clause (b) of sub-section (2) of section 80G of the Income-tax Act] ; or (ii) by way of settlement on trust, of property, the income from which, according to the deed of settlement, is to be used exclusively in connection with the temple, mosque, gurdwara, church or other place specified therein and notified as aforesaid ;] 7* * * * * (vii) to any relative dependent upon him for support and maintenance, on the occasion of the marriage of the relative, subject to a maximum of rupees[8] [one hundred thousand] in value in respect of the marriage of each such relative ; 9* * * * * 10* * * * * (x) under a will ; (xi) in contemplation of death ; (xii) for the education of his children, to the extent to which the gifts are proved to the satisfaction of the[11] [Assessing Officer] as being reasonable having regard to the circumstances of the case ; (xiii) being an employer, to any employee by way of bonus, gratuity or pension or to the dependants of a deceased employee, to the extent to which the payment of such bonus, gratuity or pension is proved to the satisfaction of the[11] [Assessing Officer] as being reasonable having regard to the circumstances of the case and is made solely in recognition of the services rendered by the employee; 12* * * * * 1. Clause (a) omitted by Act 49 of 1991, s. 85 (w.e.f. 1-4-1991). 2. Ins. by Act 66 of 1976, s. 28 (w.e.f. 1-4-1977). 3. Ins. by Act 21 of 1973, s. 21 (w.e.f. 1-4-1974). 4. Subs. by Act 32 of 1971, s. 37, for "section 88" (w.e.f. 1-4-1968). 5. Ins. by Act 10 of 1965, s. 71 (w.e.f. 1-4-1965). 6. Subs. by Act 43 of 1971, s. 37, for "sub-section (6) of section 88 of the Income-tax Act, 1961" (w.e.f. 1-4-1968). 7. Clause (vi) omitted by 23 of 1986, s. 42 (w.e.f. 1-4-1987). 8. Subs. by Act 32 of 1994, s. 55, for "thirty thousand" (w.e.f. 1-4-1995). 9. Clause (viii) omitted by 23 of 1986, s. 42 (w.e.f. 1-4-1987). 10. Clause (ix) omitted, s. 42, ibid , (w.e.f. 1-4-1987). 11. Subs. by Act 4 of 1988, s. 161, for "Gift-tax Officer" (w.e.f. 1-4-1988). 12. Clause (xiv) omitted by 23 of 1986, s. 42 (w.e.f. 1-4-1987). (xv) to any person in charge of any such Bhoodan or Sampattidan movement as the Central Government may, by notification in the Official Gazette, specify. 1* * * * * 2[(1A) Any reference in clause (v) 3* of sub-section (1) to charitable purpose in relation to a gift made on or after the 1st day of April, 1964, shall be construed as not including a purpose the whole or substantially the whole of which is of a religious nature.] (2) Without prejudice to the provisions contained in sub-section (1), gift-tax shall not be charged under this Act in respect of gifts made by any person during the previous year, subject to a maximum of rupees[4] [thirty thousand] in value. 5* * * * * Explanation. —For the purposes of this section,— (a) an individual shall be deemed to be ordinarily resident in the territories to which this Act extends during the previous year in which the gift is made if during that year he is regarded as a resident but not as not ordinarily resident[6] [within the meaning of section 6 of the Income-tax Act, subject to the modification that references in that section to India shall be construed as references to the territories to which this Act extends] ; (b) a Hindu undivided family, firm or other association of persons shall be deemed to be resident in the territories to which this Act extends during any previous year unless, during that year, the control and management of its affairs was situated wholly outside the said territories ; (c) a company shall be deemed to be resident in the territories to which this Act extends during the previous year, if— (i) it is a company formed and registered under the Companies Act, 1956 (1 of 1956), or is an existing company within the meaning of that Act ; or (ii) during that year, the control and management of that company was situated wholly in the said territories ; (d) "gifts made in contemplation of death" has the same meaning as in section 191 of the Indian Succession Act, 1925 (39 of 1925). [7] [ 6. Value of gifts, how determined. — (1) Subject to the provisions of sub-section (2), the value of any property, other than cash, transferred by way of gift shall, for the purpose of this Act, be its value as on the date on which the gift was made and shall be determined in the manner laid down in Schedule II. (2) Where a person makes a gift which is not revocable for a specified period, the value of the property gifted shall be the capitalised value of the income from such property during the period for which the gift is not revocable.] 6A. [ Aggregation of gifts made during a certain period. ] — Omitted by the Finance Act, 1986 (23 of 1986), s. 43 ( w.e.f. 1-4-1987) . 1. Clause (xvi) omitted by 23 of 1986, s. 42, (w.e.f. 1-4-1987). 2. Ins. by Act 15 of 1965, s. 21 (w.e.f. 1-4-1964). 3. The words, brackets and figures "or clause (vi)"omitted by Act 23 of 1986, s. 42 (w.e.f. 1-4-1987). 4. Subs. by Act 38 of 1993, s. 41, for "twenty thousand" (w.e.f. 1-4-1994). 5. Sub-section (3) omitted by 23 of 1986, s. 42 (w.e.f. 1-4-1989). 6. Subs. by Act 53 of 1962, s. 4, for "in the taxable territories with the meaning of the income-tax Act" (w.e.f. 1-4-1963). 7. Subs. by Act 3 of 1989, s. 81, for section 6 (w.e.f. 1-4-1989).