Share application money of pvt. co.

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

01 September 2011 Sir,
I am auditing books of account of a pvt. co. dealing in real state business. The company received fund from share application money from 2007-08 which is not public issue. But share not allotted to them and money refunded/received to next financial year. In this case i want to know that-
1. Accounting treatment according to accounting standard issued by icai.
2.It is attract any kind of tax.
3. Is it legal according to company Act, 1956.

CA Sachin D Jain

CA Sachin D Jain (Expert)
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01 September 2011 Dear Anonymouns,

Share application money received should be refunded within a reasonable period of time. This is well accepted principle as per custom followed in practice. However, no legal provision is contained in this regard in the Companies Act, 1956. Pointwise answers to your queries are as follows:
1. This a clear repayment of one kind of liability and hence, debit to liability account and credit to cash / bank / other asset.

2. This will not attract any tax liability.

3. Companies act does not specifically provide anything in this regard. However, instead of showing the same as share application money from FY 2008-09, it should be shown as Unsecured Loans.

Querist : Anonymous

Querist : Anonymous (Querist)

03 September 2011 thanks for your advise & comment on my problem

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