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The ITAT considered the issue of addition u/s 2(22)(b) r.w.s. 56(2)(viia) concerning the treatment of bonus shares received by the assessee. The AO treated the bonus shares as dividend, but the assessee argued that bonus shares do not result in income or asset value increase. The ITAT held that bonus shares issued to equity shareholders do not fall within the scope of Sec. 2(22)(b) as it pertains to preference shares. Citing legal precedents, it was established that bonus shares do not involve profit distribution and do not alter the company's capital structure. The value of original shares decreases with bonus shares issuance, balancing any profit gained. As no fresh funds are received, Sec. 56(2)(vii)(c) does not apply. The decision favored the assessee, rejecting the revenue's claim.
The ITAT considered the issue of addition u/s 2(22)(b) r.w.s. 56(2)(viia) concerning the treatment of bonus shares received by the assessee. The AO treated the bonus shares as dividend, but the assessee argued that bonus shares do not result in income or asset value increase. The ITAT held that bonus shares issued to equity shareholders do not fall within the scope of Sec. 2(22)(b) as it pertains to preference shares. Citing legal precedents, it was established that bonus shares do not involve profit distribution and do not alter the company's capital structure. The value of original shares decreases with bonus shares issuance, balancing any profit gained. As no fresh funds are received, Sec. 56(2)(vii)(c) does not apply. The decision favored the assessee, rejecting the revenue's claim.
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