Issue of shares at a premium

The issue  should not be  at a price lower than book  value of shares.  However, while issuing  shares at a premium you have to keep in mind provisions of Sec.56 of IT Act which may levy tax on excess premium treating the same as other income.

howwever there is not restriction to issue on securities premium under company act. But under income tax law, if any closely held company received the more consideration than instrinsic value of share, then more consideration will be treated as income from other sources under section 56(2)(viib) in the hand of that company.

Originally posted by : P C Agrawal
	The issue  should not be  at a price lower than book  value of shares.  However, while issuing  shares at a premium you have to keep in mind provisions of Sec.56 of IT Act which may levy tax on excess premium treating the same as other income.

You have mentioned that issue should not be at a price lower than book value as per as i understand the issue can not be more than book value. Please clarify 

Suresh Goyal