Q. Sec.56(2)(viib) applicable if shares issued with private placement at par value ?

Question

Sir, Company in main question is closely held limited company with a share capital of Rs.10/- each. Company have to pay its long Bank's outstanding of Rs.3 Crores. Company proposes to raise fund through private placement by issuing shares with par value i.e. Rs.10/-. Break up value of share of company is bellow Rs.1/- or may be minus. In this situation if company issue new share through private placement at par value i.e. Rs.10/-, whether Sec. 56(2)(viib) of the Income tax Act is applicable ?

Answer 1

No, as s. 56(2)(viib) allows issue at par value.