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Share Application Money

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(Querist)
13 April 2010 Hi ppl..i wanted to know if a Private Ltd company which is a subsidiary of a public ltd co, convert the unsecured loan which it recieved from its holding co into share application money?
If not, then what are the consequences under the company law in this regard. Also, if there are any consequences under Income Tax.

Regards
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Ankur Garg

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Ankur Garg (Expert)
14 April 2010 According to me at this point of time conversion of unsecured loan into share application money is not advisable.

You have 2 choice:

1. Continue the amount as unsecured loan and pay interest to subsi. However TDS liability is there for holding on interest income.

2. Issue shares to holding company against unsecured loan without converting in to application money.

Regards
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Apurv

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Apurv (Querist)
14 April 2010 Hi Ankur..thanks for ur help..what i also wanted to know is if it does convert holding's loan into share application money then what are the consequences? One of the company I am auditing has done the same. From what i gather, share application money has to be received vide the banking channels. What the holding company does here is it bears the expenses of its subsy which stands as a loan in the subsy's books( some by cash some by cheque). The subsy is converting this particular running a/c's balance into share application money.
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