Executive Summary:
This notification from the Ministry of Finance amends a previous notification (S.O. 2088E) concerning income tax regulations. The amendment modifies the conditions under which consideration received by a company for issuing shares exceeding face value is treated. It substitutes the approval requirement from the Inter-Ministerial Board of Certification to approval by the Central Board of Direct Taxes and takes effect retrospectively from January 16, 2019.
Key Points / Main Content:
* **Amendment Details:**
* Replaces the requirement for approval by the Inter-Ministerial Board of Certification with approval by the Central Board of Direct Taxes for share issuance considerations.
* The original notification being amended is S.O. 2088E, dated May 24, 2018.
* Relevant notifications include G.S.R. 364E dated April 11, 2018, and notification number 34E dated January 16th, 2019.
* **Legal Basis:**
* The amendment is made under powers conferred by clause (ii) of the proviso to clause (viib) of sub-section (2) of section 56 of the Income-tax Act, 1961.
* **Effective Date:**
* The notification is effective retrospectively from January 16, 2019.
Impact Analysis:
* **Companies Issuing Shares:**
* Impact: Companies seeking to issue shares at a value exceeding face value now require approval from the Central Board of Direct Taxes instead of the Inter-Ministerial Board of Certification.
* Action Required: Companies must seek approval from the Central Board of Direct Taxes for share issuances that fall under this category as per modified guidelines, effective January 16, 2019.
* **Central Board of Direct Taxes:**
* Impact: The Central Board of Direct Taxes is now responsible for approving share issuances that meet the specified criteria.
* Action Required: The Central Board of Direct Taxes must establish and implement procedures for evaluating and approving share issuances as outlined in the amended notification.
* **Investors:**
* Impact: Investors are subject to the share issuance approvals by the Central Board of Direct Taxes.
* Action Required: Investors should ensure that companies they invest in have obtained the necessary approvals from the Central Board of Direct Taxes for share issuances.
Key Entities Referenced
Incometax Act, 1961: A law being amended by this notification.
Central Board of Direct Taxes: An organisation issuing the notification under the Ministry of Finance.
Ministry of Finance: The government ministry responsible for the Central Board of Direct Taxes.
New Delhi: The location where the notification was issued.
S.O. 2088E: The notification number being amended.
24th May, 2018: Date of the notification being amended.
G.S.R. 364E: Another notification number mentioned.
11th April, 2018: Date of the notification G.S.R. 364E.
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MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 31st January, 2019
(INCOME-TAX)
S.O. 584(E).—In exercise of the powers conferred by clause (ii) of the proviso to clause (viib) of sub-
section (2) of section 56 of the Income-tax Act, 1961 (43 of 1961), Central Government hereby makes
following amendment to the notification number S.O. 2088(E) dated the 24th May, 2018 published in the
Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (ii), dated the 24th May, 2018, namely:
2. In the said notification for the words, brackets, figures, and letters “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”, the words, letters, figures
and brackets “consideration received by a company from an investor for issue of shares that exceeds the face
value of such shares, if such issue of shares is approved by the Central Board of Direct Taxes under para 4 of
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 Department of Industrial
Policy and Promotion as modified by notification number 34(E) dated 16th January, 2019 and published in the
Gazette of India, Extraordinary, Part II Section 3, Sub-section (i) dated the 16th January, 2019” shall be
substituted.
3. This notification shall be deemed to have come into force retrospectively from the 16th January, 2019.
[Notification No. 9/2019/F. No. 370142/5/2018-TPL (Pt.)]
PRAVIN RAWAL, Director (Tax Policy and Legislation)
Note : Principal notification was published in the gazette of India, Extraordinary, Part II, Section 3,
Sub-section (ii) vide S.O. 2088(E) dated the 24th May, 2018
Explanatory Memorandum: By giving retrospective effect to the present notification, no body shall be
affected adversely.
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and Published by the Controller of Publications, Delhi-110054.