Agni Ltd issued equity shares of rs 10 each at rs 40/share.
The FMV of share on date of issue was ascertained as Rs 25/share. The compamy issued 100000 equity shares
tax liability for co. ?
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Replies (10)
There's this section 56(2)(viib) in the Income Tax Act, 1961 where-in when a Pvt. Ltd. Company issues equity shares at premium (which also exceeds FMV) to a Resident, then (issue price - FMV) shall be subject to Tax under the head 'Income From Other Sources'.
Hence it is quite clear that the above provision applies ONLY WHEN shares are issued by a Pvt. Ltd. Company at a premium. In your question, its Agni Ltd which is a public company (hence not a Pvt. Co.). As a result, there will not be any tax liability, since section 56(2)(viib) does not apply.
and if it was a private ltd co
then tax ?
then tax ?
Well, in that case, its gonna be..
= (Rs.40 - Rs.25) per share x 1,00,000shares
= Rs.15 per share x 1,00,000 shares
= Rs. 15,00,000 taxable u/s 56(2)(viib) @ 30% under IOS
in my given question it is given as agni (p) Ltd.
so what should i consider
private or public?
so what should i consider
private or public?
Agni (P) Ltd. ---> is a Private Limited Company ---> Section 56(2)(viib) applies ---> Taxable
Section 57 (2) viib) applies to a company, not being a company in which the public are substantially interested. So the tax treatment mentioned for Agni Private Ltd. Will be same for Agni Ltd. assuming Agni Ltd. Is a company in which the public are not substantially interested.
No. You cannot assume such a thing.
If its "AGNI LTD".. then its a public limited company, in which case, a significant chunk of its share capital SHOULD be offered to public. As a result, it by default, becomes a company in which public are interested.
Practically, only a Private company can be considered to be a company in which Public are NOT substantially interested.
mr poltu ghosh, then what shall be the amount taxable as per you?
Dear Mr Sanjay, please refer to section 2 (18) of the Income tax act. You will find the definition.
Ms.Kajal the computation is already given by Mr. Sanjay.
Yes. Mr. Poltu Ghosh. I am well aware of Section 2(18). If you were to critically analyse the sub-section, you may realise that this company would not fall under any those sub-clausesfrom (a) to (ad), except for maybe clause 2(18)(a) [Govt controlled company].
All questions being asked by Ms. Kajal, seem to be from an Exam point of View. Keeping this in mind, making an assumption that its a Govt controlled co. would not be wise.
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