What is Liquidation
It means winding up of the company.
On winding up, the assets of the company are sold. Payment made for liabilities.
If some amount left after paying for liabilities, it is distributed to shareholders
There are 2 events
1.Distribution of asset by Company to Shareholders
This is not regarded as transfer and hence no Capital Gain imposed in this Case
2. Sale of Assets by Shareholder
In this case, Capital Gain is applicable
How is Capital Gain Computed?
Fair Market value of asset received
Deemed Dividend (Section 2 (22) (C))
If after sometime shareholder sells such assets than his capital gains will be computed as follows
FVC (Selling price of assets)
COA (it will be FMV as on Distribution of asset at liquidation and not cost)