Where a company, other than a company in which public are substantially interested, issues shares at a premium to a person being a resident, section 56(2)(viib) brings to tax in the hands of such company, the difference between the aggregate consideration received for such shares as exceeds the fair market value of the shares under the head “Income from Other Sources”.
However, such provision would not be attracted where the consideration for issue of such shares is received by a company from a class or classes of persons as may be notified by the Central Government in this behalf.
Accordingly, in exercise of such powers conferred and in supersession of Notification No 45/2016, dated 14.6.2016, the Central Government has, vide this notification, notified that the provisions of section 56(2)(viib) shall not apply to consideration received by a company, being an eligible start-up for the purposes of deduction under section 80-IAC, for issue of shares that exceeds the face value of such shares, if the consideration has been received for issue of shares from an investor in accordance with the approval granted by the Inter-Ministerial Board of Certification under clause (i) of sub-para (3) of para 4 of the notification number G.S.R. 364(E), dated 11th April, 2018 issued by the Department of Industrial Policy and Promotion.
This notification shall be deemed to have come into effect from 11.04.2018.
MINISTRY OF FINANCE
(Department of Revenue)
(Central Board of Direct Taxes)
Notification No. 24/2018
New Delhi, the 24th May, 2018
INCOME-TAX
S.O. 2088(E).—In exercise of the powers conferred by the clause (ii) of the proviso to clause (viib) of subsection (2) of section 56 of the Income-tax Act, 1961 (43 of 1961) and in supersession of the notification number S.O. 1160 dated 14th June, 2016 issued by Department of Revenue, Central Board of Direct Taxes, the Central Government, hereby notifies that the provisions of clause (viib) of sub-section (2) of section 56 of the said Act shall not apply to consideration received by a company for issue of shares that exceeds the face value of such shares, if the consideration has been received for issue of shares from an investor in accordance with the approval granted by the Inter-Ministerial Board of Certification under clause (i) of sub-para (3) of para 4 of the notification number G.S.R. 364(E), dated 11th April, 2018 and published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (i) dated the 11th April, 2018 issued by the Department of Industrial Policy and Promotion.
2. This notification shall be deemed to have come into force retrospectively from the 11th April, 2018.
[Notification No. 24/2018/F. No.370142/5/2018-TPL (Pt)]
PRAVIN RAWAL, Director (Tax Policy and Legislation)
Read an Economic Times Article. It states only there are 85 eligible start ups fulfilling this criteria.