Company autorised capital

Dear Sandeep,

1. Share Application can not be accepted if authorised capital is equal to paid up capial.. coz as per schedule VI of compamies act , issued capital cannot be morethan authourised capital.. So its the violation of companies act.

2. So the application money received during the year can be treated as unsecured loan u/s 269SS of income tax act.. so the AO can treat the same accordingly..

But Views other members shud also be solicited..

Adarsh

A company can accept application money even if its authorised cap.= paid up cap. As making application to the company for allotment is just an offer pending acceptance from the company. Without acceptance the same would not be a binding contract for the company (as explained by Ankur Sir in his previous replies).

But since the co. has refunded some of the amount, it means th co. has accepted remaining applications and should have made allotment or is in the process of making allotment to them. Views of other members solicited.

Originally posted by : SANDEEP MISHRA
	No.....actually i am asking on the basis that when company has its auth.capiatl fully paid up and its shares are not freely transferable , hw can it keep huge amt as share application money???????? Even if we look at company's act it says that co. has to refud applcation money if shares are not alloted , within 90 days otherwise pay interest. But nothing like that has happend. I think co should show such application money as unsecured loan????? Ur views are solicited.....

Sandeep..

Ur query is not clear...

please clarify whether authorised capital is fully exhausted?? if yes the excess money received on application must be refunded to the applicant... The company cannot keep that money..

the same can be treated as unsecured loan as i said in my previous reply...

Adarsh

Dear Adarsh,

I think Share application money(together with paid up capital) can exceed the Authorized capital

Can the amount of share application money be treated as undisclosed income if it was found that the subscribers to the share capital were not genuine?

CIT v. Electro Polychem Ltd. (2007) 294 ITR 661 (Mad) Relevant Section: 68 The assessee-company filed its return of income for the relevant assessment years. The Assessing Officer found that the assessee had brought share capital by way of share applications in fictitious names. Accordingly, he made additions under section 68 in respect of the share application money. The issue under consideration in this case is whether the amount of share application money can be treated as undisclosed income if it is found that the subscribers to the share capital are not genuine. The Madras High Court applied the ratio of the decision of the Delhi High Court in CIT v. Stellar Investment Ltd. (1991) 192 ITR 287 in this case. In that case, it was held that even if it be assumed that the subscribers to the increased share capital were not genuine, under no circumstances the amount of share capital could be regarded as undisclosed income of the company. This observation of the Delhi High Court was confirmed by the Apex Court in CIT v. Stellar Investment Ltd. (2001) 251 ITR 263.

Originally posted by : Amir
	Dear Adarsh, I think Share application money(together with paid up capital) can exceed the Authorized capital Can the amount of share application money be treated as undisclosed income if it was found that the subscribers to the share capital were not genuine? CIT v. Electro Polychem Ltd. (2007) 294 ITR 661 (Mad) Relevant Section: 68 The assessee-company filed its return of income for the relevant assessment years. The Assessing Officer found that the assessee had brought share capital by way of share applications in fictitious names. Accordingly, he made additions under section 68 in respect of the share application money. The issue under consideration in this case is whether the amount of share application money can be treated as undisclosed income if it is found that the subscribers to the share capital are not genuine. The Madras High Court applied the ratio of the decision of the Delhi High Court in CIT v. Stellar Investment Ltd. (1991) 192 ITR 287 in this case. In that case, it was held that even if it be assumed that the subscribers to the increased share capital were not genuine, under no circumstances the amount of share capital could be regarded as undisclosed income of the company. This observation of the Delhi High Court was confirmed by the Apex Court in CIT v. Stellar Investment Ltd. (2001) 251 ITR 263.

Dear Amir...

Dear Adarsh,

I understood what u were asking that's why I bolded that "Under No Circumstances........"

I think that if Paid up capital = Authorized capital, still that judjement will hold good........And it will not be treated as Undisclosed Income..

As per my opinion receipt of share application money over and above of Authorised capital is not a default at all. Reason being share application money is not in the nature of paid up capital unless and until allotment of share against the share application money.

In other words only after allotment of share you can consider such share application money as paid up share capital. But before passing allotment resolution you have to increase your Authorised capital.

In my Opinion..

"Paid up capital is the part of Issued Capital

and

Issued Capital is the part of Authorised Capital"

If company's authorised capital is fully exhausted, then company has to increase its Authorised Capital BEFORE BRINGING UP NEW ISSUE... and if New issue is not brought up then how can anyone get share application & for which issue the share application be filed???

So, there must be an ISSUE OF SHARES for  receiving  share application form..  If  no new issue  is  brought by the company, then share application money cannot be accepted by the company....