conversion of unsecured loan to equity share capital

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 March 2010 A pvt ltd company has received unsecured loan from another pvt ltd company.

Can the said loan be converted in to equity share from income tax point of view?
Is there any penalty for doing this?

CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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16 March 2010 Hi Dear,
FIrst tell , in which year company has received unsecured loan. If recd in the same year then why you call it unsecured loan, you can treat it share application money recd and now you convert it into share capitla.
If company has recd unsecured loan in last fy , and shown in balance sheet as unsecured loan, then it is better to return first unsecured loan , then recd share application from this company.

Guest

Guest (Expert)

23 June 2012
There is no bar for conversion of loan into share capital. You are required to enter into agreement with lender for conversion of loan into capital.

Call a Board meeting and pass a resolution and file Form-2 and form 3 within 30 days.

Regards