It notice for issuing shares at face value

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One of the Private Company issued shares at Par(FV) Rs.10 in year 2013. Now IT authority saying it cannot issues shares at Rs. 10 without valuation or Rs. 10 is less than actual book value. is this point valid... How should Company counter this Claim??
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Rule 11UA(2) clause (a) or clause (b) are the relevant poritons which prescribe for determination of fair market value or determination of valuation under an auditor's certificate of issue of shares falling under sec 56 (2)(viib) of the Act.

To invoke this section and the rule there to, to bring to tax as income the consideration for issue of shares should exceed the face value of shares.

If the consideration received is at par then this section cannot be invoked or a valuation under fair market value method or under discounted cash flow method be insisted.

In your case the issue being at par the officer is not correct in raising an objection.

Other than Sec 56(2)(viib), no other section of the act stipulates the condition put forth by the officer.


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