Issue of share

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SANIA (Querist)
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10 December 2015 can a unlisted company issue share at value higher than its book value if yes then what is tax treatment of it.

Pratik Shah

Pratik Shah (Expert)
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11 December 2015 As per Companies Act, 2013, there are no restriction to issue shares at premium (i.e. at the rate more than face value).

However, if the issued price is more than the Price which is mentioned in the valuation report (i.e. Fair value), then additional amount shall be treated as Income from Other sources. Please refer Section 56(2)(viib) of Income Tax Act, 1961

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SANIA

SANIA (Expert)
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17 December 2015 Thanks for your reply sir, I missed one thing in my question that it is unlisted public company and sec 56(2)(viib) applies to Private company.

Pratik Shah

Pratik Shah (Expert)
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17 December 2015 Section 56(2)(viib) does not say that it only applies to private company. It clearly says 'the companies in which public are not substantially interested'.
So with a basic understanding, this provision is not applicable to only Listed Company.
The objective of this section is to control circulation of unaccounted money. Listed companies are already controlled by SEBI in all aspects.
It is only private companies and unlisted public companies which are not controlled properly.
You can also check definition of �companies in which public are substantially interested� provided under section 2(18) of the Income Tax Act, 1961.

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