Pvt ltd co

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 September 2011 xyz pvt ltd inc in june 2010 with azcapital of 1 lacs, in the month of feb11 company received Rs74 lacs amount in the bank through rtgs, director are telling the amount recd is share application money but till company has not increased its azcapital from 1 lacs to 75 lacs, and as on 31st march its interest income is more than business income , so whether company non nbfc can show his interest income more than business income kidnly clarify me on the abouve issue.

thanks in advance

vicky

CA Ayush Agarwal

CA Ayush Agarwal (Expert)
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25 September 2011 Yes, no Such bared to Show.

But After Receiving Share application Money, Within 6 Month The Money should Refund if no allotment has been Made.

CA Ayush Agarwal

CA Ayush Agarwal (Expert)
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25 September 2011 Also you Have to make a Notes in Accounts About This issue.and ask to Company Responsible person.

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Querist : Anonymous

Querist : Anonymous (Querist)

25 September 2011 pls clarify on the interest income

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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10 August 2024 Let's break down the issues related to the share application money, increase in authorized capital, and the treatment of interest income for a private limited company.

### **1. Share Application Money and Increase in Authorized Capital**

**1.1. **Share Application Money**
- **Definition:** Share application money is the amount received from applicants who wish to subscribe to the shares of the company. This amount is generally held until the shares are allotted and the capital is increased accordingly.
- **Legal Requirement:** According to the Companies Act, 2013, a company must increase its authorized capital and issue shares to the applicants within a reasonable time frame after receiving share application money. The application money cannot be held indefinitely without allotting shares.

**1.2. **Increase in Authorized Capital**
- **Procedure:** To increase the authorized capital from ₹1 lakh to ₹75 lakhs, the company must follow these steps:
- **Board Resolution:** Pass a resolution in the board meeting to approve the increase in authorized capital.
- **Shareholder Resolution:** Obtain approval from the shareholders through a special resolution passed in the general meeting.
- **Filing with ROC:** File the relevant forms with the Registrar of Companies (ROC), such as Form SH-7, to update the authorized capital.

**1.3. **Impact of Non-Compliance**
- **Legal Consequences:** If the company has received substantial share application money but has not increased its authorized capital and allotted shares, it may face regulatory scrutiny. This non-compliance can lead to legal and financial repercussions.

### **2. Interest Income vs. Business Income**

**2.1. **Interest Income for Non-NBFC Companies**
- **Nature of Income:** For a non-NBFC (Non-NBFC) company, interest income is generally considered as part of the company's income but does not impact the business income classification. Interest income is typically classified under "Other Income" in the profit and loss account.
- **Accounting Treatment:** Interest income should be recorded separately from business income in the financial statements. It should be shown as a separate line item in the profit and loss account under "Other Income."

**2.2. **Financial Reporting**
- **Disclosure:** The interest income, although a significant component, should be disclosed properly in the financial statements. The company should provide clear disclosures in the notes to accounts about the sources of interest income and its impact on the overall financial performance.
- **Compliance:** Ensure compliance with accounting standards (e.g., Ind AS or AS) for proper classification and disclosure of income.

**2.3. **Tax Implications**
- **Tax Treatment:** Interest income is taxable under the Income Tax Act, 1961. The company should include this income in its tax returns and pay tax accordingly. The interest income is not subject to any special tax treatment just because it exceeds the business income.

### **Summary**

- **Share Application Money:** If a company receives share application money, it must increase its authorized capital and allot the shares within a reasonable time. Failure to do so may result in non-compliance issues.
- **Interest Income:** For a non-NBFC company, interest income should be classified under "Other Income" and disclosed separately from business income in the financial statements. Ensure compliance with accounting standards and tax regulations for accurate reporting and tax payment.

If there are specific concerns or complexities, consulting with a professional accountant or legal advisor is advisable to ensure compliance with the relevant laws and regulations.