Can share capital be used for expenses?
The same was held in the cases of in Brooke Bond India Ltd Vs CIT (1997) 225 ITR 798 (SC), where the Supreme Court held that share issue expenses are capital in nature and cannot be claimed as deduction.
What is the filing fees for increase in Authorised capital?
Charges for Additional Authorized Capital For each lakh of additional share capital from Rs. 1 lakh to Rs. 5 lakh, Rs. 4,000 per lakh of Authorised capital.
What is increase in authorized share capital?
The authorised capital is the maximum amount of capital for which the Company can issue shares to the shareholders. A company may take the necessary steps required to increase the authorised capital limit in order to issue more shares, but it cannot issue shares exceeding the authorised capital limit in any case.
Are share issue expenses preliminary expenses?
It was held that share issue expenses are capital for income-tax purposes. 35D of the Income Tax Act, dealing with amortising of preliminary expenses. If the issue is made to finance a project, share issue expenditure constitutes preliminary expenditure for the purposes of this section.
How do you account for share capital?
Share capital is reported by a company on its balance sheet in the shareholder’s equity section. The information may be listed in separate line items depending on the source of the funds. These usually include a line for common stock, another for preferred stock, and a third for additional paid-in capital.
What type of account is share capital?
Share capital (shareholders’ capital, equity capital, contributed capital,Contributed SurplusContributed surplus is an account in the shareholders’ equity section of the balance sheet that reflects excess amounts collected from the or paid-in capital) is the amount invested by a company’s shareholders for use in the …
How do I pay stamp duty for increase in authorised capital?
5 lakhs of authorised capital or part thereof subject to a maximum of 50 lakhs of stamp duty. Stamp duty shall be Rs. 1000 on every Rs. 5 Lakhs of amount of increase in authorised capital or part thereof subject to a maximum of 50 Lakhs of stamp duty.
Can a company increase its Authorised capital?
It is necessary to convene a Board meeting by providing notice to Director to increase the authorized share capital of the company. At the Board meeting, it is necessary to obtain approval from the Board of Directors for increasing the authorized share capital.
What are the benefits of increasing Authorised share capital?
With the increase in share capital, the company’s overall net worth also increases. This further enhances the borrowing capacity of the company. It could invite investments as the same can be easily accommodated if there is enough authorised capital.
What is the treatment of preliminary expenses?
Normally preliminary expense are treated as intangible asset and shown on the asset side of the balance sheet under the head Miscellaneous asset. The preliminary expenses are amortized or written off in five years for the purpose of Income Tax in India.
What is the treatment of preliminary expenses in cash flow statement?
Answer: Thus, while preparing a cash flow statement by indirect method, preliminary expenses are added back to net profit before taxation and extra-ordinary items under operating activities. No treatment for preliminary expenses is required if cash flow statement is prepared by direct method.
Why are fees paid for increase in authorized capital?
Fees paid to ROC for increase in authorised capital does not exactly relate to asset being created in here and is paid to ease the influx of share capital that is going to be brought in subsequently. The influx of capital will ultimately be used by the enterprise for their ordinary course of business.
What kind of expenses are associated with share issue?
A company may incur a host of expenses such as professional consultation, underwriting commission, legal expenses, printing expenses, listing expenses etc., when it opts for issue of share capital. Taxation of such expenses can be analysed with reference to Section 35D, Section 32 and Section 37 of the Income Tax Act.
How does increase in authorised capital affect fixed capital company?
The increase in the authorised capital does not by itself result in expending the capital base or the fixed capital company. This expenditure is more in the nature of expenditure laid out for facilitating the assessee’s operations and to enable it to carry on its business more efficiently and profitably.
How is authorized capital expense treated in company law?
YOUR EXPOSURE ON THIS PART OF COMPANY LAW PROVED VERY USEFUL TO ALL OUR CA CLUB MEMBERS. Expenses incurred towards increasing authorized capital is an revenue expense and its charged to statement of profit & loss account in the year of its occurred , but as per income tax it is a disallowable expenditure….