(First published on Moneycontrol: https://www.moneycontrol.com/news/economy-2/listed-share-acquisitions-govt-weighs-relief-to-shield-deals-from-tax-volatility-12970899.html/amp)
My view has always been that in case of a commercially negotiated deal, provisions of deemed taxation under section 56(2)(x) should not apply in the hands of the acquirer, since the said provision is an anti abuse provision, and in case of an arm’s length transaction, there cannot be a question of tax avoidance.
However, as an immediate measure, it should be clarified to reckon the transaction price vis-a-vis the market price as on the date of signing the deal, rather than as on the date once open offer is completed in case of acquisition of listed companies, since the price could run up significantly between the signing and closing, potentially resulting in adverse tax implications in the hands of the acquirer.
Sharing my views, as quoted in moneycontrol.com, on the above topic