1. The tax office says the issue of shares to existing shareholder @ face value is not allowed

2. Mumbai Tribunal in Sudhir Menon HUF case held that in case of proportionate allotment of shares, there would be no taxability u/s 56(2)(vii)(c)(ii)

3. This is because the gain accruing on the allotment of fresh shares will be offset by the loss in value of existing shares.

4. Sec 56 being anti-abuse provision will not apply in case of a genuine issue of shares to existing shareholders

5. Rajeev Ratanlal Tulshyan – 136 taxmann.com 42 (Mum)