Section 68 share capital proof and warehouse operations: documentary evidence and commercial exploitation supported business income treatment.

Share subscription money supported by PAN details, audited accounts, bank statements, application records and assessment material of the subscribing companies was held to satisfy the onus under section 68; mere non-service of notices or shareholder non-appearance was insufficient, so the addition was deleted. Rental receipts from a warehouse operated as a specialised commercial facility, with supporting infrastructure and services, were treated as business income because the activity was integral to the assessee's business objects and commercial exploitation of infrastructure, not passive ownership of property.

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Issues: (i) Whether the addition made under section 68 in respect of share subscription money was sustainable; (ii) whether rental income from the warehouse was assessable as business income or as income from house property.

Issue (i): Whether the addition made under section 68 in respect of share subscription money was sustainable.

Analysis: The assessee had produced PAN details, audited financial statements, bank statements, share application records, board resolutions and assessment orders of the subscribing companies. The subscribing companies were independently assessed to tax, had substantial own funds, and the payments were routed through banking channels without cash deposits preceding the remittances. The material on record did not establish any falsity in the documents or any concrete inquiry disproving the identity, creditworthiness or genuineness of the transactions. Mere non-service of notices or non-appearance of shareholders was held insufficient on these facts.

Conclusion: The addition under section 68 was unsustainable and was rightly deleted, in favour of the assessee.

Issue (ii): Whether rental income from the warehouse was assessable as business income or as income from house property.

Analysis: The assessee's memorandum of association contemplated infrastructure development and operation, and the warehouse was set up and run as a specialized commercial facility with plant, machinery, security, maintenance and allied services. The receipts were earned from an organized commercial activity of exploiting the warehouse infrastructure, and the factual matrix brought the case within the business character of the activity. The reasoning followed the principle that where letting is integral to the business object and commercial operations of the assessee, the receipts assume the character of business income.

Conclusion: The rental receipts were taxable as business income and not as income from house property, in favour of the assessee.

Final Conclusion: The Revenue's appeal failed on both substantive issues and was dismissed.

Ratio Decidendi: Where an assessee discharges the onus under section 68 by credible documentary evidence showing the identity, creditworthiness and genuineness of share applicants, and where warehouse receipts arise from a commercially exploited infrastructure business carried on in accordance with the assessee's objects, the additions cannot be sustained and the receipts are assessable as business income.

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