TaxTMI 
TaxTMI 
2015 (11) TMI 295
X X X X Extracts X X X X
X X X X Extracts X X X X
....d received share application amount with Rs. 40/- premium from three applicants in AY. 2008-09. AO called for the details of the shareholders who had paid premium along with share application money and from the details furnished, AO further observed that out of the total contributors to share capital, three contributors i.e. M/s. Basuknath Developers Pvt. Ltd., M/s.Uplink Vyapar Pvt. Ltd and M/s. Corbal Suppliers Pvt. Ltd., had paid share application money @ Rs. 10/- per share and Rs. 40/- towards premium per share, thus for each share the parties have paid Rs. 50/- in total. In respect of AY. 2009-10, AO observed from the Schedule-II of the Balance Sheet, that under the head 'Reserves and Surpluses', the appellant had shown an amount of Rs. 1,35,00,000/- under share premium account. On verification of the details furnished in respect of the above, it was observed by the AO that when the other share contributors have paid Rs. 10/- per share, five companies viz., M/s. Gyaneshwar Trading and Finance Co. Ltd., M/s Sidh Housing Development Co. Ltd., M/s. Artillegence Bio Innovations Ltd., M/s Clifton Securities (P) Ltd. and M/s. Oshin Investments & Finance Pvt. Ltd., had paid R....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 5,62,500 28,12,500 28,12,500 Artilengence Bio Innovations Ltd 2009-10 5,62,500 5,62,500 28,12,500 28,12,500 Cliffon Securities (P) L 2009-10 56,250 5,62,500 22,50,000 28,12,500 Oshin Investments and Finance Pvt. Ltd., 2009-10 1,12,500 11,25,000 45,00,000 56,25,000 TOTAL: 15,00,000 1,35,00,000 1,50,00,000 4. It was contended that all the persons who contributed the money have confirmed the amounts with the details of bank account, PAN, Income Tax details, payments of money along with intimation given on allotment of shares to the Registrar of Companies. It was further contended that AO did not dispute the genuineness of investment but only chosen to treat the receipt of share premium as 'Income from Other Sources' without invoking provisions of Section 68. Assessee further contended that money raised represent share capital and it will be capital in nature and it would not constitute income of assessee merely because the shares were sold at premium. It relied on the following judicial decisions that share premiums received constitute capital receipts: a. Addl. CIT Vs. Om....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and treating the same as unexplained credits, did not arise at the stage of assessment and for the same reasons treating the same as unexplained credit, at this stage, may not serve any purpose. As such the receipts of share premia, need to be examined from the point of it's taxability as revenue receipt and as income from other sources, as against the claim of the appellant as capital receipt, while examining the provisions under which such amounts can be taxed. 5.6. Regarding the taxability of the said share premium as income from other sources, the contention of the appellant was that it was outside the scope of taxing provisions, since the intended amendment to Sec. 56(2) is only operative from 01.04.2013, as such the share premium collected for the AY 2008-09 and AY 2009-10, are not within the ambit of proposed amendment of Sec. 56(2). This argument of the appellant appears to have considerable force and is well supported by decision of ITAT, Hyderabad in Appeal No. in ITA No. 647/Hyd/2011 and IT No. 135/Hyd/2013 dated 24.05.2013, wherein the Hon'ble ITAT, observed as under": "The share premium cannot be brought to tax as it is a capital receipt and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... had to be transferred to a capital account called Share Premium Account. As per the provisions of the Companies Act, the amount received by the assessee as share premium required to be credited in the share premium accounts only. Since it is a capital received on par with the share capital received, the same cannot be treated as a revenue receipt. In fact, Hon'ble Delhi High Court in the case cited above, also gave a finding that the amount cannot be considered as a business receipt, as the amount was brought to tax under the head 'income from other sources'. Similar facts existed in the case also as the assessee has not commenced business activity in the impugned assessment year and the AO brought the amount to tax as the income from other sources only, without specifying the section under which the same was considered as income. therefore, both on facts and on Iaw, the amount of share premium has to be considered as capital receipt, which cannot be brought to tax in the impugned assessment year. Accordingly, the assessee's grounds are allowed and the AO is directed to delete the addition made kin that behalf." 5.8 Thus, based on the facts of the case it ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncome is effective from 01.04.2013. However, without any allegation of fraud or quid pro quo for any illegal transaction or any type of unjust enrichment or without any justification for receiving so much premium, in the absence of legal provision the capital receipt on premium account be considered as income as made out by the Assessing Officer and the CIT(A)". 8. Further, the same issue was also considered by the Co-ordinate Bench at Mumbai in the case of M/s. Green Infra Ltd. Vs. ITO in ITA No. 7762/Mum/2012, dt. 23-08-2013, wherein also on a similar issue, it was considered not taxable. 9. Hon'ble Bombay High Court in the case of Vodafone India Services (P) Ltd vs. Union of India [2014] 368 ITR 1 (Bombay) (supra) held that: "The word 'income' for the purpose of the Act has a well understood meaning as defined in Section 2(24) of the Act. This even when the definition in Sec. 2(24) of the Act is an inclusive decision. It cannot be disputed that income will not in its normal meaning include capital receipts unless it is so specified, as in section 2(24)(vi) of the Act. ....... The amounts received on issue of share capital including the premium is undou....