Corpdaily by CS Kartik Arora

In terms of Section 45 of the Income Tax Act, 1961 (“Act”), tax under the head capital gain arises only upon transfer of capital asset. Section 2 of the act puts light on the term “transfer” in relation to capital assets and tries to cover all transactions that would be considered as transfer for the purpose of computing capital gain tax. Further, Section 47 of the act talks about certain transactions which are not regarded as transfers in the eyes of the law and hence not liable to tax under the head capital gain. Transfer Transactions not regarded as transfer  Kind Attention: The information provided herein is for education purpose only and the author assumes no responsibility or liability for any errors or omissions in the content.

  Issuance of shares at a price higher than its Fair Market Value  Money is important for getting the business up and running, the importance of money in business cannot be exaggerated. Until the company is profitable, it is highly dependent on funding for its day-to-day operations. Private Companies usually raise funds by way of issuance of shares or by availing financial assistance in the form of debt. It is important for corporates to comply with the provisions of Sec 42, Sec 62 and the rules made thereunder before issuing shares. Further, it is also important to ensure compliance with the provisions contained under Section 56(2)(viib) of the Income Tax Act, 1961. Section 56(2)(viib) states that in case a company in which the public is not substantially interested issues shares at a price greater than the face value of such shares and the aggregate consideration received from a resident person for such shares exceeds their Fair Market Value, then the amount received in excess of

Hi Readers, Shareholders are the owners of the company, they have the ultimate control over the affairs of the company which is generally exercised by the directors appointed by them.  Especially in closely held companies, shareholders reach out to the company with a request for a loan to meet their personal necessities. In such cases, the first question that comes to our mind is whether the company can grant a loan to the shareholders and what will be the tax implication of such transaction. In this blog, we have made an endeavor to enlighten you with the relevant provisions relating to granting of loan to the shareholders of the company. Kind Attention: The information provided herein is for educational purposes only and the author assumes no responsibility or liability for any errors or omissions in the content.