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query for issue of share at FV

Vinit (CA Final ) (188 Points)

27 November 2018

can a pvt ltd company having accumulated profit issue share at FV?

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Hitesh (Student) (3549 Points)
Replied 27 November 2018

Yes it can issue at Fair value

Vinit (CA Final ) (188 Points)
Replied 27 November 2018

since the book value is Rs. 20 but the company want to issue at Face value of Rs. 10 . plz reply if do that than what will be the consequences.

Hitesh (Student) (3549 Points)
Replied 27 November 2018

oh I thought FV means Fair value thanks for clarification it can issue shares at face value there won't be any consequences

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Vinit (CA Final ) (188 Points)
Replied 27 November 2018

can u plz share something or provide me the section no. so that i can establish the same. and also plz confirm there will be no any income tax liability in the hands of company or shareholder.

Hitesh (Student) (3549 Points)
Replied 27 November 2018

Refer 56(2)(viib) of income tax act dear. Yes for the shareholder if shares are issued for inadequate consideration or no consideration and such value exceeds 50000 then it is taxable in hands of shareholder

Vinit (CA Final ) (188 Points)
Replied 27 November 2018

That means the difference of Rs 10 i.e. book value - face value (20-10) will be considered as inadequate consideration?

Hitesh (Student) (3549 Points)
Replied 27 November 2018

Yes for the shareholder for company no implications. Also for shareholder if such inadequate consideration exceeds 50000 then it is taxable in hands of shareholder else no tax implication for shareholder too

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