2011 (9) TMI 989

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....and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in deleting the addition of ₹ 45,41,542/- on account of write back of loan. (iii) The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing." 3. In this case, during the course of assessment Assessing Officer observed that assessee has credited a sum of ₹ 1,78,30,072/- as capital reserves. The details of which were submitted as under:- "The company is a wholly owned subsidiary of Interactive Composition Corporation, USA (holding company). The company had received share application money from its holding company in earlier years. The share application money was received partly in cas....

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....(Appeals) dealt with the issue. Ld. Commissioner of Income Tax (Appeals) held that a sum of ₹ 1,32,88,530/- was not taxable u/s 28(iv) of the IT Act and secondly he held that a sum of ₹ 45,28,192/- was also not taxable u/s. 41(1) of the IT Act. Accordingly, Ld. Commissioner of Income Tax (Appeals) directed for the deletion of the additions. 5. Against the above order the Revenue is in appeal before us. 6. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that liability incurred by the assessee on account of share application money and the purchase of fixed assets is undoubtedly on capital account. It was not a liability incurred on account of trading operations. 6.1 As fa....

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....lding that the addition of ₹ 45,41,542/- made by the Assessing Officer u/s 41(1) is liable to be deleted. 7. As far as taxation of the transfer of ₹ 1,32,88,530/- from the share application account to the capital reserve account is concerned, the Assessing Officer has taxed it under section 28(iv) of the IT Act. Section 28(iv) reads as under:- Profits and gains of business or profession. 28. The following income shall be chargeable to income-tax under the head "Profits and gains of business or profession",- [(iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession] 7.1 According to the legal principles as explained by various judicial pronou....