shara application money

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"A' Company has received share application money in cash during the year. Instead of alloting the share of "A" Company it  transer the investment which exist in his books to these shareholders  is it legal?

Balance sheet of A company

==============================================================

Capital                                                                             Assets

Share application Money  in cash             Investment in shares  to

from 

shareholders  x       50000                                In shares of  Company abc  50000

Question 

Can the company A which has received share appliocation money in cash from  Mr. X  , intstaed of alloting its own shares can it sell it investment in abc company to Mr. x so that Mr. X become the shareholders of Comapny abc: by merely passing a book entry. 

 

Replies (2)

Dear Sanjay,

y r u complicating it..simply show the return/refund of share application money & thereafter sells the investment to Mr.X.

hey,

 

According to me it is a clear case of indirect transfer of capital asset(i.e. investment of ABC ltd in this case)...So provisions for capital gains would be attracted....and also I think it is conceptually not correct that to a person who have given share application money u are giving investment instead.......So as amir said we can show that share application money refunded and then investment sold to Mr. X...

 

Archit

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