Govt simplifies procedure for startups to seek exemption from applicability of sec. 56(2)(viib)

The Ministry of Commerce and Industry,Department of Industrial Policy and Promotion hassimplified procedure for startups to seek exemption from applicability of S. 56(2)(viib) of Income Tax Act.

The fourth para of the notification which provides conditions for Approval for exemption from clause (viib) of sub-section (2) of section 56 of the Act has been amended by the below mentioned notification.

Govt simplifies procedure for startups to seek exemption from applicability of S. 56(2)(viib)

MINISTRY OF COMMERCE AND INDUSTRY

(Department of Industrial Policy and Promotion)

NOTIFICATION

New Delhi, the 16th January, 2019

G.S.R. 34(E).This notification is being issued in partial modification of Gazette Notification No. G.S.R. 364(E) dated April 11, 2018.

1. In the said Notification-para 1 (e) is replaced with the following

CBDT means the Central Board of Direct Taxes constituted under the Central Board of Revenue Act, 1963.

2. Para 4 of the Notification shall be read as under:

Approval for the purposes of clause (viib) of sub-section (2) of section 56 of the Act.

4. (1) A Startup which is recognised by DIPP under para 2(iii) (a) shall be eligible to apply for approval for the purposes of clause (viib) of sub-section (2) to section 56 of the Act for the shares already issued or proposed to be issued if the following conditions are fulfilled

(i) aggregate amount of paid up share capital and share premium of the startup after the proposed issue of share, if any, does not exceed ten crore rupees;

(ii) The investor/ proposed investor shall have

(a) returned income of Rs. 50 lakh or more for the financial year preceding the year of investment/proposed investment; and

(b) net worth exceeding Rs. 2 crore or the amount of investment made/proposed to be made in the startup, whichever is higher, as on the last date of the financial year preceding the year of investment/proposed investment.

(2) (i) Application for approval under this para shall be made in Form-2 to DIPP and shall be accompanied by the documents specified therein:

Provided that in case the approval is requested for shares already issued by the Startup, no application shall be made if assessment order has been passed by assessing officer for the relevant financial year.

(ii) The application of the recognised startup shall be transmitted by DIPP to CBDT with the necessary documents.

(3) The CBDT, within a period of 45 days from the date of receipt of application from DIPP may grant approval to the Startup for the purposes of clause (viib) of sub-section (2) of section 56 of the Act or decline to grant such approval.

3. In para 5 (1) and 5 (2) after word Board words or CBDT are added.

4. Para 6 shall read as under:

6. This Notification shall come into effect on the date of its publication in the Official Gazette. The Government will carry out a review of this Notification before 31.03.2021.

[F. No. 5(4)/2018-SI]

ANIL AGRAWAL, Jt. Secy.