Clause 21 - Amendment of section 56. - Finance (No. 2) Bill, 2019

Amendment of section 56. 21. In section 56 of the Income-tax Act, in sub-section (2), (i) in clause (viib), with effect from the 1st day of April, 2020,- (a) in the proviso, in clause (i), for the words venture capital fund , the words venture capital fund or a specified fund shall be substituted; (b) after the proviso, the following proviso shall be inserted, namely:- Provided further that where the provisions of this clause have not been applied to a company on account of fulfilment of conditions specified in the notification issued under clause (ii) of the first proviso and such company fails to comply with any of those conditions, then, any consideration received for issue of share that exceeds the face value of such share shall be deemed to be the income of that company chargeable to income-tax for the previous year in which such failure has taken place. ; (c) in the Explanation, after clause (a), the following clauses shall be inserted, namely:- (aa) specified fund means a fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate which has been granted a certificate of registration as a Category II Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012 made under the Securities and Exchange Board of India Act, 1992(15 of 1992); (ab) trust means a trust established under the Indian Trusts Act, 1882 (2 of 1882) or under any other law for the time being in force; ; (ii) in clause (viii), for the words, brackets, letters and figures clause (b) of section 145A , the words, brackets, figures and letter sub-section (1) of section 145B shall be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 2017; (iii) in clause (x), (A) in sub-clause (b), in the second proviso, for the words bank account , the words bank account or through such other electronic mode as may be prescribed shall be substituted with effect from the 1st day of April, 2020; (B) in the proviso, after clause (X), the following clause shall be inserted with effect from the 1st day of April, 2020, namely:- (XI) from such class of persons and subject to such conditions, as may be prescribed. . Note: While Passing the bill in the Loksabha as on 18-7-2019, the following amendments were made: Clause 21 Amendments made: Page 10, for lines 7 to 9, substitute consideration received for issue of share that exceeds the fair market value of such share shall be deemed to be the income of that company chargeable to income-tax for the previous year in which such failure has taken place and, it shall also be deemed that the company has underreported the said income in consequence of the misreporting referred to in sub-section (8) and sub-section (9) of section 270A for the said previous years. , . (12) Page 10, in line 13, for Category II , substitute Category I or a Category II (13) Thus, the amended provision will be: 21. In section 56 of the Income-tax Act, in sub-section (2), (i) in clause (viib), with effect from the 1st day of April, 2020,- (a) in the proviso, in clause (i), for the words venture capital fund , the words venture capital fund or a specified fund shall be substituted; (b) after the proviso, the following proviso shall be inserted, namely:- Provided further that where the provisions of this clause have not been applied to a company on account of fulfilment of conditions specified in the notification issued under clause (ii) of the first proviso and such company fails to comply with any of those conditions, then, any consideration received for issue of share that exceeds the fair market value of such share shall be deemed to be the income of that company chargeable to income-tax for the previous year in which such failure has taken place and, it shall also be deemed that the company has underreported the said income in consequence of the misreporting referred to in sub-section (8) and sub-section (9) of section 270A for the said previous years. ; (c) in the Explanation, after clause (a), the following clauses shall be inserted, namely:- (aa) specified fund means a fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate which has been granted a certificate of registration as a Category I or a Category II Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012 made under the Securities and Exchange Board of India Act, 1992(15 of 1992); (ab) trust means a trust established under the Indian Trusts Act, 1882 (2 of 1882) or under any other law for the time being in force; ; (ii) in clause (viii), for the words, brackets, letters and figures clause (b) of section 145A , the words, brackets, figures and letter sub-section (1) of section 145B shall be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 2017; (iii) in clause (x), (A) in sub-clause (b), in the second proviso, for the words bank account , the words bank account or through such other electronic mode as may be prescribed shall be substituted with effect from the 1st day of April, 2020; (B) in the proviso, after clause (X), the following clause shall be inserted with effect from the 1st day of April, 2020, namely:- (XI) from such class of persons and subject to such conditions, as may be prescribed. .