Tax implication of shares sold in premium for pvt ltd

If company is receiving this on account of share issuance than it won't be considered as income , its just a capital receipt and you just need to increase your share capital...but if your MD is selling his shares to someone than it will be treater as capital gain on the hand of your MD.

In the later case MD can use this money to invest in New company...

As per Sec 56(2) (viib) where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares.

Which means if the issue value which includes premium exceeds the fair market value of shares, then the excess value will be chargeable to tax as Income from other source in the hands of the Company.