SHARE APPLICATION MONEY PENDING ALLOTMENT

[RISHAB JALAN]

Dear All,

I need to understand the impact of holding share application money pending allotment for more than 6 months in the current scenario under Companies Act & Income Tax Act

Please revert with your valuable suggestions.

Regards,

CA Rishab Jalan

[Kirti Tulsyan]

REPLY 1

With regeard to disclosure of amount held to the credit of Share application Account the revised provisions of Schedule VI in the companies Act  throw some light.if there  is a definitive agreement to make the allotment of shares within a given period the share application money can be shown as part of share capital in the Balance sheet.If there is no certainty as to allotment the amount has to be shown as part of current liabilities.In the case of a listed company there is a requirement to make the allotment within the time frame laid under SEBI guidelines relating to public issue.
For an unlisted company no specific timelines have been laid down under the Act for making the allotment.However as per the draft Deposit Rules which have been released by MCA under chapter V pursuant to the Companies Act 2013,any amount received by way of share application money will be treated as a Deposit under the rules if shares are not alloted within 60 days from the date of receipt if the amount is not refunded within 15 days following the period of 60 days from the date of receipt.however these rules are not yet final.
From the stand point of the income tax Act to my mind there is no implication as regards amount held by way of share application money.
regards
kalidas 

REPLY 2

dear querist,

your answer is given in revised schedule VI itself.

In nutshell u need to elaborate and disclose following for share appln.pending allotment:

pl. see under note G -current liabilities,sub clause(g):

the terms and conditions including the no. of shares proposed to be isued,

the premium ,if any and the period before which shares shall be allotted,

whether the co. has sufficient authorised capital to cover the share capital amount resulting from allotment of shares out of share appln. money amount,

the period for which share appln. money has been pending beyond the period for allotment as given in documents inviting appln for shares along with reason for such share appln. money being pending.

share appln.money  not exceeding the issued capital and to the extent not tefundable shall be shown under the head equity and share appln to the extent refundable i.e the amount in excess of subscription or in case requirements of minimum subscription are not met, shall be separately shown under "other current liabilities"

SO FAR AS INCOME TAX ASSMT. IS CONCERNED IT WILL BE ASSESSED JUST LIKE NEW SHARE CAPITAL WITH TWO LAYERS OF SOURCE TO BE PROVED.

hope this meets with your query.

 

Vinod Kumar Goyal,F.C.A.P.G.D in A.D.R.
Senior Partner V.Goyal & Associates 
Chairman:A.N.M.I.,e.i.r.c.
Chairman:D.P.A.I.,e.i.r.c.

Chairman:H.P.L.A.

--

Best Regards, 
Kirti Tulsyan
B.Com.,ACA,CS


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[ca.sreekanths]

Dear Al, 

as per new Act,

New Deposit Rules provides that any amount received and held (i.e. after 1st April, 2014) pursuant to an offer made in accordance with the provisions of the Act towards subscription to any securities, including share application money or advance towards allotment of securities pending allotment is to be apportioned against allotment of securities within 60 days or to be refunded within next 15 days.

If company fails to do this entire such amount will be treated as deposit and will attract penalty & fine etc.

In my view share application money accepted under old act and pending for allotment on 1st day of April 2014 need not be required to be apportioned within 60 days or to be refunded within next 15 days under the provisions of the New Act. Since the said amount is not received and held pursuant to the offer made under new act.

Hence, in my view, the same should be disclosed as:

Revised Schedule VI

There are specific disclosures required by the Revised Schedule VI for ‘Share Application money pending allotment’. It has been also stated that share application money not exceeding the issued capital and only to the extent not refundable is to be included under ‘Equity’ and share application money to the extent refundable is to be separately shown under ‘Other current liabilities’.

Disclosures required regarding share application, whether included under ‘Equity’ or under ‘Other current liabilities’ are as under:

(a) terms and conditions;

(b) number of shares proposed to be issued;

(c) the amount of premium, if any;

(d) the period before which shares are to be allotted;

(e) whether the company has sufficient authorised share capital to cover the share capital amount on allotment of shares out of share application money;

(f) Interest accrued on amount due for refund;

(g) The period for which the share application money has been pending beyond the period for allotment as mentioned in the share application form along with the reasons for such share application money being pending.

CA SREEKANTH S

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