TaxTMI 
TaxTMI 
2016 (8) TMI 375
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.... Rs. 95. 88 lakhs under the normal provisions of the Act and book profit of Rs. 2. 11 crores under the provisions of 115JB of the Act. The Assessing Officer (AO)completed the assessment u/s. 143 (3)of the Act, determining the income of the assessee at Rs. 58. 20 crores. 2. The effective Ground of Appeal is about treating the share premium received by the assessee, amounting to Rs. 56. 10 crores as a business receipt and thereby confirming the addition of share premium u/s. 56(1) of the Act to its total income. During the assessment proceedings, the AO found that the assessee had issued 40 lakhs equity share of face value of Rs. 10/- each out of which 10 lakh shares had been issued at par, that the premium received by the assessee was credi....
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.... the share premium. He invoke the provisions of section 56 (1) to bring the above receipt as income under the head income from other sources, that the provisions of section 56 (2) did not bark taxing any item under section 56 (1). He finally concluded that the assessee had received Rs. 56. 10 corrodes in the guise of share premium and that the same had to be taxed under the head income from other sources. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA). Before him, it was argued that the assessee had issued cumulative redeemable preference shares of face value of Rs. 10/- each at a premium of Rs. 187/-, that the shares were converted into equal number of equity shares at the ....
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....sh on the Assets side of the Balance sheet for business purposes as effective use of share premium, that the assessee had clarified to the AO, during the assessment proceedings, that share premium at the beginning of the year was the same as the end of the year, that share premium had not been utilised at all, that the AO had relied upon the cases that had no relevance to decide the issue. The assessee referred to the case of Vodafone India Services Pvt. Ltd. (368ITR1)and argued that premium received on issue of share was a capital receipt and the same should not be taxed under the head ' income from other sources' . 3. 1. After considering the submission of the assessee and the assessment order the FAA held that face value of the shares h....
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....e relied upon the case of Sundaram Iyengar and Sons Ltd. (222ITR344) of the Hob'ble Supreme Court. He held that it was possible that nature of a receipt might undergo a change from capital to revenue over a period of time, that the AO had rightly held that share premium had changed its colour/character. He upheld the addition made by AO amounting to Rs. 56. 10 crores. 4. During the course of hearing before us, the Authorised Representative (AR) argued that the CBDT, vide its Instruction no. 2/2015 dt. 29. 1. 2015, had informed the officers of the Department about accepting the order of Hon'ble High Court of Bombay in the case of Vodafone (supra). He further argued that facts of the case of Sundaram Iyengar and Sons Ltd. were not applicable....
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....LA. Without such a clear mandate nothing can be imported to implemented to other Act/(s). While dealing with the assessment or appeals, under the provisions of the Income tax Act, the basic principle every officer of the department has to remember that he is the representing the Sovereign and his duty is to collect Due taxes only. For determining the Due taxes they should avoid bringing farfetched fancies and ideas. In the case under consideration they have done the same. Without understanding the basic philosophy of income they have referred to the provisions of CA, so that the amount in question can be taxed at any cost. It is not a fair or judicious approach to deal with the Subjects of the State. Even if the assessee had violated the pr....