Sec. 2(19)AA(iv): To qualify as demerger one of
the conditions is that the resulting company, as consideration for
demerger, issues its shares to the shareholder of the demerged
company in proportionate basis. An amendment is to be made w.e.f
1st April, 2013, which provides that where the resulting company
itself is the shareholder of the demerged company, there is no need
to issue shares. Therefore, it shall not be necessary for the
resulting company to issue shares to itself.
Transactions not regarded as transfer: Sec. 47(vii)(a)
Under the current provision, in order for a merger to qualify as
a tax free merger, it is required that shares have to be issued by
the resulting entity to the shareholders of the merging entity. A
proposed amendment to the current Sec. 47(vii) states that if the
amalgamated company is itself the shareholder of the amalgamating
company, then there is no requirement for the amalgamated company
to issue shares to itself.
