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Date: 24-May-2023 Category: Extra Ordinary State: Union Government Country: India

Notification under clause (ii) of the first proviso to clause (viib) of sub section (2) of section 56 of the Income tax Act

Issued by Ministry of Finance · Department of Revenue

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Executive Summary & Key Takeaways

What it means

  • This notification provides an exemption from Section 56(2)(viib) of the Income-tax Act, 1961 for consideration received by a company for the issuance of shares exceeding their face value. This exemption applies if the consideration is received from a person by a company that meets specific conditions outlined in notification G.S.R. 127(E) issued by the Department for Promotion of Industry and Internal Trade (DPIIT) and files the required declaration.
  • The notification supersedes an earlier notification S.O. 1131(E) dated March 5, 2019, with the exception of actions already taken or omitted before this supersession.

Key Changes

  • Exemption from Section 56(2)(viib) of the Income-tax Act, 1961 is granted under specific conditions.
  • The exemption applies to consideration received for the issuance of shares exceeding face value.
  • The company must fulfill the conditions specified in DPIIT notification G.S.R. 127(E) dated February 19, 2019.
  • The company must file the declaration as prescribed in para 5 of the DPIIT notification.
  • The notification is effective from April 1, 2023.
  • Notification S.O. 1131(E) dated March 5, 2019 is superseded, except for past actions.

Impact Analysis

Startups and Companies

  • Action Item: Companies should maintain documentation to demonstrate compliance with the DPIIT notification conditions.

Investors

  • Action Item: Investors should conduct due diligence to verify that the company fulfills the conditions outlined in DPIIT notification G.S.R. 127(E).

Tax Authorities

  • Action Item: Update internal guidelines and assessment procedures to reflect the changes introduced by this notification.

Key Entities Referenced

Income-tax Act, 1961: The principal legislation governing income tax in India. Section 56(2)(viib) deals with the taxation of share premiums. Central Board of Direct Taxes (CBDT): A part of the Department of Revenue in the Ministry of Finance, responsible for administering direct tax laws. Department for Promotion of Industry and Internal Trade (DPIIT): A department under the Ministry of Commerce and Industry, responsible for policies related to the promotion of industry and internal trade. Notification G.S.R. 127(E), dated February 19, 2019: Notification issued by DPIIT specifying the conditions that a company must fulfill to be eligible for the exemption. Notification S.O. 1131(E) dated 5th March 2019: The notification that has been superseded by this new notification, except for actions already taken or omitted.
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रजिस्ट्री स.ं डी.एल.- 33004/99 REGD. No. D. L.-33004/99 सी.जी.-डी.एल.-अ.-24052023-246044 xxxGIDHxxx CG-DL-E-24052023-246044 xxxGIDExxx असाधारण EXTRAORDINARY भाग II—खण् ड 3—उप-खण्ड (ii) PART II—Section 3—Sub-section (ii) प्राजधकार स ेप्रकाजित PUBLISHED BY AUTHORITY स.ं 2181] नई ददल्ली, बुधिार, मई 24, 2023/ज्य ष्े ठ 3, 1945 No. 2181] NEW DELHI, WEDNESDAY, MAY 24, 2023/JYAISHTHA 3, 1945 जित्त मत्रं ालय (रािस्ट्ि जिभाग) (केन्द्रीय प्रत्यक्ष कर बोडड) अजधसचू ना नई ददल्ली, 24 मई, 2023 का.आ. 2275(अ).—केन्द्रीय सरकार, आयकर अजधजनयम, 1961 (1961 का 43) की धारा 56 की उपधारा (2) के खंड (viiख) के पहले परंतुक के उपखंड (ii) द्वारा प्रदत्त िजियों का प्रयोग करत े हुए, तथा भारत के रािपत्र, असाधारण, भाग II खंड 3, उपखंड (ii) में प्रकाजित जित्त मंत्रालय, रािस्ट्ि जिभाग, केन्द्रीय प्रत्यक्ष कर बोडड की अजधसूचना सं. का.आ. 1131(अ), तारीख 5 माच,ड 2019 को अजधक्ांत करते हुए, ऐसे अजधक्मण के पूिड की गई या दकए िाने से लोप की गई बातों के जसिाय, यह अजधसूजचत करती ह ै दक उि अजधजनयम की धारा 56 की उपधारा (2) के खंड (viiख) के उपबंध िेयरों को िारी करन े के जलए दकसी कंपनी द्वारा प्राप्त प्रजतफल को लाग ूनहीं होंग े िो ऐस े िेयरों के अंदकत मल्ू य स े अजधक है, यदद उि प्रजतफल दकसी कंपनी द्वारा दकसी व्यजि स े प्राप्त दकया गया ह ैिो भारत के रािपत्र, असाधारण, भाग II खंड 3, उपखंड (i), तारीख 19 फरिरी, 2019 में प्रकाजित िाजणज्य और उद्योग मंत्रालय के उद्योग और आंतकरक व्यापार संिधडन जिभाग द्वारा िारी अजधसूचना सं. सा.का.जन. 127(अ), तारीख 19 फरिरी, 2019 के पैरा 4 में जनर्ददष्ट ितों को पूरा करती ह ैऔर उद्योग और आतं करक व्यापार संिधडन जिभाग की उि अजधसूचना के परै ा 5 म ें जनर्ददष्ट घोषणा फाइल करती ह ै। 2. यह अजधसूचना 1 अप्रैल, 2023 से प्रिृत्त समझी िाएगी । [अजधसूचना सं. 30/2023/फा. सं. 370142/9/2023-टीपीएल (पाट-ड 1)] अमृत प्रीतम चेजतया, अिर सजचि (कर नीजत और जिधान) 3298 GI/2023 (1)2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(ii)] स्ट्पष्टीकरण ज्ञापन यह प्रमाजणत दकया िाता ह ै दक इस अजधसूचना को भूतलक्षी प्रभाि ददए िान े से दकसी व्यजि पर जिपरीत प्रभाि नहीं हो रहा ह ै। MINISTRY OF FINANCE (Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES) NOTIFICATION New Delhi, the 24th May, 2023 S.O. 2275(E).—In exercise of the powers conferred by clause (ii) of the first proviso to clause (viib) of sub-section (2) of section 56 of the Income-tax Act, 1961 (43 of 1961) and in supersession of the notification of Government of India in the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (ii) vide number S.O. 1131(E) dated 5th March 2019, except as respect things done or omitted to be done before such supersession, 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 said consideration has been received from any person, by a company which fulfills the conditions specified in para 4 of the notification number G.S.R. 127(E), dated the 19th February, 2019 issued by the Ministry of Commerce and Industry in the Department for Promotion of Industry and Internal Trade and published in the Gazette of India, Extraordinary, Part-II, section 3, Sub-Section (i) on 19th February, 2019 and files the declaration referred to in para 5 of the said notification of the Department for Promotion of Industry and Internal Trade. 2. This notification shall be deemed to have come into force from the 1st day of April 2023. [Notification No. 30/2023/F. No. 370142/9/2023-TPL (Part-I)] AMRIT PRITOM CHETIA, Under Secy. (Tax Policy and Legislation) Explanatory memorandum It is certified that no person is being adversely affected by giving retrospective effect to this notification Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064 and Published by the Controller of Publications, Delhi-110054.

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