|Question And Answer|
|Subject:||Whether provisions of section 56(2) (x) are applicable to Rights issue of shares ?|
|Answered by:||Advocate Shashi Ashok Bekal|
|Tags:||56(2)(vii)(c), income from other sources, right issue shares|
|Date:||May 23, 2021|
Good evening sir. My query is: Are the provisions of section 56(2)(viib) and 56(2)(x) applicable on rights issue of shares? Mumbai ITAT in two judgements have held that 56(2)(vii)(c) provisions are not applicable to rights issue. So, similarly can it be said that 56(2)(x) provisions are not applicable to rights issue?
Section 56 (2)(x) of the Act is an anti-abuse provision. Since the transaction of issue of right shares is as per the provisions of the Companies Act and Rules framed thereof, it cannot be said that the transaction is without consideration or without any substance.