Subodh Consumer Products Limited (SCPL) decided to demerge its food and beverages business into a separate entity, Subodh Foods Limited (SFL). The demerger allowed SCPL to concentrate on its core products line while its

In the case of demerger, the existing shareholders of the demerged company will hold after demerger: (a) shares in resulting company; and (b) shares in demerged company. And in case the shareholder transfers any of the above shares subsequent to the demerger, the cost of such shares shall be calculated as under: - Cost of acquisition of shares in the resulting company [Section 49(2C)] The cost of acquisition of the shares in the resulting company shall be the amount which bears to the cost of acquisition of shares held by the assessee in the demerged company the same proportion as the net book value of the assets transferred in a demerger bears to the net worth of the demerged company immediately before such demerger. Cost of acquisition of shares in the demerged company [Section 49(2D)] The cost of acquisition of the original shares held by the shareholder in the demerged company shall be deemed to have been reduced by the amount as so arrived at under sub-section (2C). For the above purpose, net worth shall mean the aggregate of the paid-up share capital and general reserves as appearing in the books of account of the demerged company immediately before the demerger. Period of holding of shares of the resulting company [Section 2(42A) (g)] In the case of a capital asset, being a share or shares in an Indian company, which becomes the property of the assessee in consideration of a demerger, there shall be included the period for which the share or shares held in the demerged company were held by the assessee.