GAURAV JAIN (.) (30 Points)
16 February 2014Can newly formed private limited company issue share of Rs. 10/- each at premium of Rs. 250/- per share? Company has not started its business. Is there any restriction under Company Law, Income Tax or any other law?
Syam Kamal
(Company Secretary)
(66 Points)
Replied 17 February 2014
There is no restrictions for issue of shares at premium
P C Agrawal
(Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad)
(8229 Points)
Replied 17 February 2014
Pl refer Sec.56(viib) of IT Act read with Rules 11U and 11UA of IT Rules. Consideration in excess of prescribed method will be taxed under the head Income from Other Sources.
Syam Kamal
(Company Secretary)
(66 Points)
Replied 17 February 2014
Premium received on issue of shares is a capital receipt the usage of which is restricted vide section 78 of the Companies Act, 1956 and can not be taxed under section 56 of the IT Act unless there is a specific provision of chargeability.
Correct me if am wrong
P C Agrawal
(Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad)
(8229 Points)
Replied 17 February 2014
In India anything can happen. We have seen tax on expenses (FBT). There is tax on buy back of shares. There is double tax on dividend. So why not tax on excess premium on shares?
Syam Kamal
(Company Secretary)
(66 Points)
Replied 17 February 2014
Yes. U are right. Premium will be taxable for companies in which public are not substantially interested. Share premium is will be taxable as other income in this case since its a private limited company.
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