Amendments to Tax Law Applied Prospectively for Share Capital and Premium: Tribunal Decision

The Tribunal held that the amendments to Section 68 and Section 56(2)(viib) are prospective and applicable only from Assessment Year 2013-14. Share capital and premium were deemed capital receipts and not income, leading to the deletion of the Rs. 2,58,00,000 addition under Section 68 for Assessment Year 2012-13. The appeal was allowed, overturning the decisions of the AO and CIT(A).

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Issues Involved:
1. Addition of Rs. 2,58,00,000 under Section 68 of the Income Tax Act, 1961.
2. Application of amended Section 68 for Assessment Year 2012-13.
3. Genuineness of the share capital and share premium transactions.
4. Retrospective vs. prospective application of amendments to Section 68 and Section 56(2)(viib).

Issue-wise Detailed Analysis:

1. Addition of Rs. 2,58,00,000 under Section 68 of the Income Tax Act, 1961:
The appellant company, engaged in trading construction materials, increased its share capital and share premium by Rs. 2,58,00,000 during the Assessment Year 2012-13. The Assessing Officer (AO) deemed this amount as income under Section 68, citing doubts about the identity and genuineness of the allottees. The CIT(A) confirmed this addition, stating that the company did not have the capacity to attract such a large premium and that one of the promoters was involved in creating shell companies to route unaccounted money.

2. Application of amended Section 68 for Assessment Year 2012-13:
The appellant argued that the amended Section 68, which places a higher onus on the assessee to explain the nature and source of share capital and premium, was applicable only from Assessment Year 2013-14. The CIT(A) erroneously applied this amendment retrospectively to the appellant's case for Assessment Year 2012-13. The appellant cited several judicial precedents, including the Supreme Court's decision in Roshan Di Hatti, to argue that the amendment could not be applied retrospectively.

3. Genuineness of the share capital and share premium transactions:
The appellant contended that all investments were made through banking channels and the identity of the subscribers was established through PAN numbers, audit reports, and other documents. The AO had acknowledged receiving confirmations in response to inquiries under Section 133(6), although these confirmations were on letter pads without telephone numbers. The appellant further argued that the AO did not point out any defects in the submitted documents.

4. Retrospective vs. prospective application of amendments to Section 68 and Section 56(2)(viib):
The appellant relied on several judicial decisions to argue that the amendments to Section 68 and Section 56(2)(viib) were prospective and applicable only from Assessment Year 2013-14. The Bombay High Court in Vodafone India Services (P) Ltd. and the Supreme Court in G. S. Homes and Hotels P. Ltd. held that share capital and premium are capital receipts and cannot be taxed as income. The ITAT Mumbai Bench in Arogya Bharti Health Park Pvt. Ltd. also held that these amendments are prospective.

Judgment:
The Tribunal held that the amendments to Section 68 and Section 56(2)(viib) are prospective and applicable only from Assessment Year 2013-14. The Tribunal cited several judicial precedents, including the Bombay High Court's decision in Gagandeep Infrastructure Ltd. and the Supreme Court's decision in G. S. Homes and Hotels P. Ltd., to support this view. The Tribunal concluded that share capital and premium are on capital account and cannot be considered as income. Therefore, the addition of Rs. 2,58,00,000 under Section 68 was deleted.

Conclusion:
The appeal was allowed, and the addition made by the AO and confirmed by the CIT(A) was deleted. The judgment emphasized that the amendments to Section 68 and Section 56(2)(viib) are prospective and cannot be applied to Assessment Year 2012-13. The Tribunal upheld the principle that share capital and premium are capital receipts and cannot be taxed as income.

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