Share Application Money

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Dharam Prakash Singh (Querist)
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16 September 2010 Dear All,

I am again presenting the query before you to resolved this one.
I want to know that what is the process to introducing Share application Money for newly formed Pvt. Ltd. Company.

2.) Can we Indroduce share application money in cash. If Yes then what is the limit.

It's most urgent please.

Ankur Garg

Ankur Garg (Expert)
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16 September 2010 It is not advisable to accept Share application money in cash.

If the Company has accepted the Share Application Money you may do one simple thing. You may record the above transaction i.e. receipt of share application money and assurance given to proposed allottee in the board meeting minutes.

In other words simple noting of such receipt in the board minutes would be enough. No need to take any kind of approval from any concerned authorities.

Regarding time limit to convert such share application money into capital the law is silent. However as per practice allot share with 6 months of the receipt of application money.

Further collect the share application form from the proposed allottee for your record. You may download the sample share application from the link mentioned below:

https://www.caclubindia.com/share_files/files_display.asp?files_id=11908

Regards

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Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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16 September 2010 Divergent views are there under the Income tax Act,1961.
Delhi Tribunal in the case of Prabhavashali Chit fund co pvt Ltd (49 ITD 566) said share application money should be treated at par with loan or deposit confirming applicability of 269SS/T which attracts penalty under section 271D/E of the said act.
Where as Madras high court in Rugmini Ram Raghav Spinners Pvt Ltd's case reported in 220 CTR 520 that share application money is neither loan nor deposit within the meaning of the above said sections.

In view of the above, it is better to avoid cash dealings of share application money.

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