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SEVERAL THOUSAND “SECTIONS 8” COMPANIES IN INDIA WHY ONLY “RAHUL GANDHI” GETS INCOME TAX NOTICE AS HE S DIRECTOR IN “YOUNG INDIAN”?

 
 
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SEVERAL THOUSAND “SECTIONS 8” COMPANIES IN INDIA WHY ONLY “RAHUL GANDHI” GETS INCOME TAX NOTICE AS HE S DIRECTOR IN “YOUNG INDIAN”?
by System Administrator - Tuesday, 23 April 2019, 5:15 PM
 

By : M.S.Yatnatti: Editor and Video Journalist Bengaluru : NSKFDC was incorporated on 24th January, 1997 under Section 25 (Now section 8) of the Companies Act as a 'Not For Profit' Organization. NSKFDC is a wholly owned Government Undertaking under the aegis of Ministry of Social Justice & Empowerment. NSKFDC commenced its operations in October,1997. The Company has an authorized capital of Rs. 710 crores and paid-up capital of Rs 629.99 crores as on date.Government appoints officials and non officials to as directors NSKFDC and this does not get disclosed in their personnel income tax declaration as it does not accrue income to them and as such directors do not get income tax notice then why only AICC President Sri Rahul Gandhi Ji get income tax notice? as he is also Director of young Indian section 8/25 company as that of  NSKFDC and other's and such thousands of "Non profit organizations " and companies are registered  Under section 25 /Section 8 of companies Act.It is important to read section 8 of companies Act . Whether section 8 company is income tax exempt or not under income tax Act 12 AA  the face value of share of section 8 company does not change .Section 8 company is free to engage in commercial ventures and it may pay income tax also but it shares valuation is not done as it is dividend free company under section 8 of companies Act and it share value never changes .So no income on share transfer of section 8 company and consequently no income tax notice on share transfer .Commercial company share transfer is a taxable event . Section 8 company share transfer is a not a taxable event. Income tax department cannot treat commercial companies and not for profit companies M&A under one parameter. Section 8 companies are by law cannot trade their shares and its share value will remain the face value at any given time as it is not commercial company. The contention of income tax department that "The taxable event in these cases is the allotment of YI's shares to the assessees @ Rs. 100 per share on 22.01.2011 "for a consideration, which is less than the aggregate fair market value of the property” and it is the difference between the fair market value and the actual consideration paid for the shares which is sought to be assessed as "income from other sources” in accordance with Section 56(2)(vii)(c)(ii) read with the Rules." Is incorrect as Young Indian is section 8 company without dividends and at any given points its shares value do not get enhanced and question of "fair market value at any time will remain static to 100 rupees only. Actually it might be a cut and paste mistake of MOA which did mentioned about fair market value otherwise this mistake in MOA can be corrected to represent section 8 of the company. To win income tax case it is necessary to amend MOA of Young Indian. I feel MOA of Young Indian need to corrected to truly represent section 8 company.  MOA and AOA for Section 8 company under Companies Act 2013 need to be as per Section 8 of company. : MOA cannot over shoot section 8 of companies Act. Declaration in Form INC 14 by professional stating that draft of MOA and AOA have been drawn up in conformity with the provisions of Sect 8 and rules thereof and that all the requirements of the Act and Rules thereof have been complied therewith. ICAI Clarification regarding Applicability of Form GNL 1 for Change in MoA by Section 8 Companies instead of Form RD 1 [17 May 2016].The ICAI vide Announcement dt 17 May 2016 has clarified that Form GNL 1 is applicable for making changes in Memorandum of Association (MoA) by Section 8 Companies instead of Form RD-1, as under:The Ministry of Corporate Affairs is receiving references from professionals/companies seeking clarification on the forms/process to be followed for alteration in the Memorandum of Association of Section 8 Companies .The professional/companies are filing Form RD-1 seeking approval to change in Memorandum of Association. However, as per the applicable laws read with Rules and relevant Circulars & Notifications, power for approving change in Memorandum of Association has been delegated to the Registrar of Companies.In the background of this development the professionals/companies are advised to apply the request for change in Memorandum of Association of Section 8 Companies in Form GNL-1 instead of filing form RD-1.In case of a section 8 company which is wholly owned subsidiary of another section 8 company, can the shares be purchased by other persons at face value ? Yes off course a company registered under this section shall amalgamate only with another company registered under this section and having the same objective yes they purchase share at face value. Question of fair market value does not arise in section 8 companies.