Misplaced enthusiasm

The taxman must stop harassing start-ups

The income-tax department has, for some time now, sought to crack down on unlisted companies that issue shares at a premium. This follows the amendment of the Income Tax Act in 2012 by the introduction of Section 56(2) viii(b), an “anti-abuse” clause that insists that investments at a premium that cannot be “explained” to the satisfaction of the taxman will be treated as income. This was introduced, incidentally, following the uproar surrounding the use of unlisted companies in the controversial distribution of 2G telecom licences. The income-tax department’s activism surrounding this clause had raised concerns in the start-up sector, where