Can preference share be issued at premium?

Yes, preference shares can be issued at premium subject to the conditions specified u/s 55 read with Rule 9 of the Cos.(Issue of shares and debentures)Rules, 2014.

Security Premium received on such issue does not form part of profit. It is a part of Networth. Hence there shall be no tax implication on SP in the hands of company. From the point view of shareholders, it stands as an investment in securities and the dividend so received on such shares shall be subjectt to tax in the hands of shareholders.

A small correction to above. Any dividend distributed to holders of shares and which suffers tax under section 115O in the hands of the companay that distributes such dividends, is exempt under serction 10(34) of the Income-tax Act. As such Dividend received on Preference shares shall be exempt in the hands of shareholder.