Provided further that where the provisions of this clause have not been applied to a company on account of fulfilment of conditions specified in the notification issued under clause (ii ) of the first proviso and such company fails to comply with any of those conditions, then, any consideration received for issue of share that exceeds the fair market value of such share shall be deemed to be the income of that company chargeable to income-tax for the previous year in which such failure has taken place and, it shall also be deemed that the company has under-reported the income in consequence of the misreporting referred to in Sub-section (8) and Sub-section (9) of Section 270A for the said previous year.
by a company from a class or classes of persons as may be notified by the Central Government in this behalf.įollowing second proviso shall be inserted after the existing proviso to clause (viib) of Sub-section (2) of Section 56 by the Act No. by a venture capital undertaking from a venture capital company or a venture capital fund 67 or Provided that this clause shall not apply where the consideration for issue of shares is received. (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: (2) In particular, and without prejudice to the generality of the provisions of Sub-section (1), the following incomes, shall be chargeable to income-tax under the head “Income from other sources”, namely:. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head “Income from other sources”, if it is not chargeable to income-tax under any of the heads specified in Section 14, items A to E. RELATED PROVISIONS IN THE INCOME TAX ACT AND INCOME TAX RULEĥ6. The relevant portion of law is reproduced below. In this article,we will look into the legal issues in invoking the provisions of Sec 56(2)(viib) of Income Tax Act 1961. The AO can verify the source of the subscription and also can apply the yardstick of Sec 56(2)(viib) of Income Tax Act 1961. Subscription received with huge premium, is a common issue in company assessments. The assessment of share premium is always a contentious issue. Towards the end, the issue of angel tax which occupied quite a space in the public discourse till recently, has also been touched upon.
Several case laws on the issue has been presented for better appreciation by the readers.
the route of Section 68 or Section 56 (2)(viib). This article examines the two alternative approaches the AO should adopt while examining the issue where share premium received is in excess of its fair market value, i.e. Taxation of share premium is a relatively new but litigated area of taxation.
#Writedown in premium manual#
Was Member of contributors for “Investigation Manual” and TPO manual on “Financial Transactions”. Received appreciation letters for Contribution in TDS as well as DTRTI, Kolkata.
Regular visiting faculty of DTRTI, Kolkata and Visiting Sr. More than 25 year of experience as an officer of Income Tax Department in various departments including Investigation, Central ,Corporate ,TDS and Transfer Pricing charges.
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