TaxTMI 
TaxTMI 
TaxTMI 
2017 (5) TMI 964
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....d to promoters and other investors and transferred the said amount to the capital reserve. During the assessment proceedings the assesse submitted before the Assessing Officer that said amount is capital receipt and as such should not be treated as revenue receipt. But Assessing officer has ignored the submissions of the assesse and treated the said receipt as revenue in nature. 3. Not being satisfied with the order passed by the AO, the assessee filed an appeal before the CIT(A), who has deleted the additions of Rs. 12.40 crores observing the followings :- "7.8 On careful analysis of the decision of the ITAT Delhi Bench I find that the factual matrix of the decided case is identical to the facts involved in present case. In the impugned order the AO assessed the amount forfeited as appellants income assessable U/s 28(iv) of the I.T. Act. In the decided case due consideration of the terms of the issue of optionally convertible warrant the Tribunal came to the conclusion that the amount did not represent revenue receipt and it was also not assessable U/s 28 (iv) of the I.T. Act. So the facts involved in the present case are found to be identical to the issue involved in the case ....
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....t the ld. AO has concluded wrongly, that the amount of Rs. 12.40 crores transferred by the assessee to the Capital Reserve and representing amount of share warrant forfeiture is a revenue receipt and should be taxed under section 28(iv) of the Act. The Ld. AR further submitted that this conclusion of the AO is without appreciation of the facts and the law on the subject. The Ld. AR also submitted that the amounts involved are capital receipts and hence not taxable as income of the assessee. A share warrant is a financial instrument which entitles the holder thereof to acquire certain shares on certain conditions which are mentioned in the share warrant itself. The Section 114 of the Companies Act, 1956 deals with the issue and effect of a share warrant to a bearer. A public company limited by shares, if so authorised by its articles, may, with the previous approval of the Central Government, with respect to any fully paid-up shares, issue under its common seal a warrant stating that the bearer of the warrant is entitled to the shares therein specified, and may provide, by coupons or otherwise, for the payment of the future dividends on the shares specified in the warrant. A combine....
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....pital Loss, and the assessee has treated the said forfeiture as a Capital Reserve, there is no tax payout in either hand. This reasoning is devoid of any legal basis and can never form the basis of completing an assessment. In addition to this, ld. AR for the assessee has relied on the following judgments :- (i).Hoshiarpur Electric Supply Co. [1961] 41 ITR 608 (SC) "The receipts though related to the business of the assessee as distributors of electricity were not incidental to nor in the course of the carrying on of the assessee's business; they were receipts for bringing into existence capital of 'lasting value. Contributions were not made merely for services rendered and to be rendered, but for installation of capital equipment under an agreement for a joint venture. The total receipts being capital receipts, the fact that in the installation of capital, only a certain amount was immediately expended, the balance remaining in hand, could not be regarded as profit in the nature of a trading receipt." (ii).Kettlewell Bullen & Co. Ltd. [1964] 53 ITR 261 (SC) "Whether a particular receipt is capital or income from business, has frequently engaged the attention of the ....
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....mining the nature of receipt in the hands of the assessee As held by Hon'ble Supreme Court, in the "case of Dr. K George Thomas v. CIT [1985] 156 ITR 412/23 Taxmann 46, "the burden is on the revenue to establish that the receipt is of revenue nature" though "once the receipt is found to be of revenue character, whether it comes under exemption or not, it is for the assessee to establish". . . In the instant case the Ld. AO has not discharged its burden by bringing anything on record to prove that the receipt is revenue in nature. The reasons assigned by the Ld. AO were wrong and insufficient. Provisions of the act ought to have been properly construed and applied. The receipt and subsequent forfeiture of the share warrant money was towards capital contribution of the company and as such it cannot be held to be revenue in nature and consequently cannot be termed as income within the meaning of section 2(24) of the Act. All types of receipts cannot constitute income of an assessee. Capital receipts / loan receipts does not constitute income of the recipient. In the instant case, the money forfeited was received for the capital of the company. In the instant case, the share war....