TaxTMI 
TaxTMI 
TaxTMI 
2015 (10) TMI 2042
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....re application money along with the premium. The case of the assessee was selected for scrutiny and scrutiny assessment order was passed u/s.143(3) of the Act on 4th March, 2013. The CIT(A) invoked his power under Section 263 on the following plea :- (i) The share premium amount received by assessee, while increasing the assets in balance-sheet in the form of cash/bank balance does not create any liability in the balance sheet. This amount of premium gets reflected in the reserves and under the company's Act the nature of these reserves are such which can be distributed to the share holders in the form of bonus shares. The relevant provisions of Company's Act applicable to share premium are u/s.78 of Company's Act. What can be distributed ....
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....95 ITR 282. Reliance was also placed on the decision of Hon'ble jurisdictional High Court in the case of Design and Automation Engineers (Bombay) Pvt. Ltd., 323 ITR 632 and Gabriel India Ltd., 203 ITR 108. To substantiate the claim of issue of shares at premium, ld. AR contended that Mr. Dilip Dalal, director of M/s. Cougar Investments Private Limited, the assessee company, has been associated with capital markets since last 35 years. He is in the industry of Capital Markets since the early age of 20 years. He has got wide experience in various segments of stock market, like derivatives, arbitrage, IPO's, technical analysis of listed companies, consultancy services etc. He is providing consultancy services to many reputed brokers, like ....
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....Elder Group, through its associate concerns, would pump in the requisite finance of around Rs. 3 crores to take the activities of the company at higher level, without diluting the controlling interest of Mr. Dalal over the company. Towards this, it was mutually decided, keeping in mind the future prospects and based on valuation, that 1,24,000 shares would be issued to them at premium of Rs. 240/- per share. This was done in two phases during the year. 4. With regard to CIT's allegation regarding not complying with the provisions of Section 78, ld. AR contended that the assessee - company has not passed the benefit of the premium, directly or indirectly, to any shareholder or any outsider and has used the share premium wholly and exclusive....
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....ent year under consideration was 2010-2011. Accordingly the CIT was not correct in applying in amended provisions with retrospective effect. 6. On the other hand, ld. AR contended that the AO has not made full enquiry with regard to the nature of share premium received by it. He further relied on the decision of Hon'ble Kerala High Court in the case of P.V.Sreenijin & Anr. V. CIT & Ors., 106 DTR 0087, Hon'ble Bombay High Court in the case of Hindustan Lever Ltd., ITA No.5818/2010, wherein it was observed that where the order was passed by the AO without application of mind, the same is liable to be set aside by the CIT u/s.263. 7. We have considered the rival contentions, carefully gone through the orders of the authorities below. We had ....
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....The CIT stated that the AO has not made any enquiry about the nature of receipt in temrs of Section 68. We found that the "nature of cash credit" was self evidence, being the amount received on account of issue of shares at premium. In support of the shares having been issued at premium assessee had filed duly audited accounts, certified by the statutory auditor before the AO. Even the background of promoter of assessee company as discussed above in the arguments of ld. AR clearly justify the amount of premium charged on the shares. Furthermore, it is the wisdom of person applying for share to determine whether to buy the shares at a premium or not. Revenue cannot stand in the way of person opting to buy share at a premium insofar as source....
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.... subject matter of the enquiry in the first instance. Instead, the issue was whether the amount invested by the share applicants were from legitimate sources. 9. In the case of Gagandeep Infrastructure Pvt. Ltd., ITA No.5784/Mum/2011, order dated 23-4-2014, the Mumbai Tribunal held that issue of shares at premium is always a commercial decision which does not require any justification. Further the premium is a capital receipt which has to be dealt with in accordance with section 78 of the Companies Act, 1956. 10. After going though the material placed on record, we found that the AO has called for financial details of the companies and also examined the parties in order to satisfy himself about the genuineness of the transaction and sourc....