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Issues: (i) Whether the addition made under section 68 on account of share application money and premium received from a foreign investor was sustainable. (ii) Whether the decapitalisation of travelling expenses on the ground of personal use by directors was sustainable.
Issue (i): Whether the addition made under section 68 on account of share application money and premium received from a foreign investor was sustainable.
Analysis: The share investment was received through banking channels and the valuation of shares was made in accordance with the RBI pricing guidelines and the DCF method. The foreign tax authority confirmed the transaction, the bank statement of the investor was forwarded, and the source of the investment and the source of the source were established through the material received from the competent authority under the relevant exchange of information mechanism.
Conclusion: The addition under section 68 was not sustainable and was rightly deleted, in favour of the assessee.
Issue (ii): Whether the decapitalisation of travelling expenses on the ground of personal use by directors was sustainable.
Analysis: The travelling expenditure was supported by documentary evidence and was found to have been incurred for business purposes for the hotel project. No material was brought by the Assessing Officer to show that the expenditure was personal in nature.
Conclusion: The decapitalisation of travelling expenses was not justified and was rightly deleted, in favour of the assessee.
Final Conclusion: The Revenue's appeal failed in entirety and the relief granted by the appellate authority was maintained.
Ratio Decidendi: Where share capital and premium are supported by banking records, valuation in line with regulatory pricing norms, and confirmation from the foreign competent authority, the addition under section 68 cannot stand; similarly, business travel expenditure supported by evidence cannot be disallowed as personal merely on conjecture.
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