Q. Is valuation necessary for selling/transferring Preference & Equity shares of a loss making start up company

Question

A start up company, incorporated in FY 2020-21, issued preference share at par and equity shares at premium to new investors.

However the company is in loss, and investors want to write off their investment by selling their shares to promoter at loss.

My question is, do we need to get the selling price of pref and equity shares valued by outside agency, or since the company is in loss, promoter can buy, both, preference and equity shares, at minimal value?

Thanks,

Vikram Goel

9810001840

Answer 1

The sale value has to be as per rule 11 UA of the income tax rules. If it is sold at that price or above that there would be no income tax issues.