NO EXEMPTION 
Axe comes down on tax evaders 

The government continues to march on the path of bringing tax evaders within the tax ambit. Earlier, transactions such as dividend stripping were brought under the tax net. Now, it is the turn of transfer of shares of private companies (and certain unlisted companies such as subsidiaries of listed companies) in favour of firms/other such companies that has caught the taxman's eye.
Such tax is proposed to be applicable on transactions which are carried out after June 1,2010.In such cases, the recipient firm/company would need to pay tax on the difference in actual and fair market value, provided the difference is above Rs 50,000.
For example, under the proposal, if X Private Limited receives shares in Y Private Limited worth Rs 25 lakh for Rs 20 lakh, then, X Private Limited would need to pay tax on the differential Rs 5 lakh at the applicable rate, ie 33.22% (including surcharge and education cess).
This provision is introduced to serve as an anti-abuse provision, to prevent laundering of unaccounted income under the garb of gifts, and avoid tax evasion. This may also discourage certain tax planning schemes, whereby unlisted shares are transferred at prices much below their fair market value.
However, some other unintended issues may also crop up, such as: 
An exception for tax on gifts has been proposed in the Bill in case of individuals /HUFs who receive shares, etc, as their stock-in-trade. However, no exception has been made in case of firms/companies dealing in shares for applicability of this provision. Further, it is unclear whether after paying tax on differential value, such recipient firms/companies would be able to consider the enhanced value to compute taxable business profits at a later point in time.
This provision may necessitate fair market valuation to be done in all transfers of shares, to compute/ascertain if there is any likelihood of any differential value being subject to tax. Such valuation could be subjective (and difficult in case of unlisted small companies) and also factors such as distress sale, etc, may not be considered by tax department 
There may be genuine instances where, due to difference in opinion, the valuation reports may not confirm the transaction value as the fair price. In these cases also, this provision would create hurdles for the buyer of the shares.
Given the above, while the intention behind introducing such a provision is laudable, it appears that such unintended issues can be avoided for the peace of mind of the genuine taxpayer.

Times of India, New Delhi, 28-02-2010