TaxTMI 
TaxTMI 
2016 (11) TMI 1463
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.... 2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in not appreciating the facts that the allotment of shares to only group companies and not to the companies other than group companies. 2. Since the facts are identical, we are adjudicating the issue with reference to figures from ITA No. 403/Nag/2016. 3. Brief facts of the case are as under : During the course of assessment proceedings, the AO noted that the assessee had received share application money of Rs. 3,39,00,000/- during the year. On further verification, the AO observed that out of this share application, the assessee had received a sum of Rs. 3,30,52,500/- towards share premium amount. The AO observed that the assessee company did not have any significant business for which somebody would pay this amount of share premium. The assessee during the course of assessment proceedings submitted that the receipt of share premium is a capital receipt and hence non taxable. However, the AO was not satisfied, he observed as under : 4. The AO further observed as under : " The explanation given by assessee was not sufficient to prove and justify the base of huge premium because the assessee had receiv....
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....meaning of sec. 28(iv) of the I.T. Act, 1961 is added back to the total income of the assessee." 5. Upon assessee's appeal, learned CIT(Appeals) elaborately considered the submissions of the assessee. Learned CIT(Appeals) also obtained remand report from the AO. In the remand report the AO reiterated the findings of the AO in the assessment order. The AO observed that regarding the receipt of share application money including huge share premium the assessee failed to establish the reasonableness, establish any market segment, project enhancement, future prospects in a company, that the amount received with the share premium was nothing but profits received in the hands of the company. That the contention of the assessee that the source of funds was established had no relevance because the assessee company had received huge quantum of share premium without having any potential. That this premium has been paid in investment in group companies only and no outsiders was involved. That this proves the nature of transaction was artificial. Therefore, the premium received by the assessee was held to be profit within the meaning of section 28(iv) and brought to tax. 6. Considering the as....
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....ax decided vide ITA No.3070 & 3071/Del/2008 (E-Bench) has considered the similar question with similar grounds of appeal 6.4 Again I find that ITAT, Mumbai in the case of DP World (P) Ltd. Vs. DCIT 140 ITD 694 has stated that in a case where assessee received residential flats from its sister concerns, a UK based company, which the assessee explained as transaction of gift of shares and agreement of capital receipt not chargeable to tax. Considering the facts of the case the Hon'ble Tribunal held that provision of Sec.28(iv) could not be applied to the assessee's case. 6.5 I also find that similar issue has been decided in favour of the appellant by Hyderabad Tribunal in case of M/s K.N.B. Investments (P) Ltd. The matter has also been decided in favour of the appellant in appeal before Hon'ble High Court of Andhra Pradesh decided vide 367 ITR 616. 6.6 Further I find that the Hon'ble High Court of Delhi in the case of Jindal Equipments Leasing & Consultancy Services Ltd. Vs. CIT in 325 ITR 87 (Delhi) has considered a similar issue of benefit arising to an assessee. The matter under consideration before the Hon'ble Court was that whether amount due to assessee - investment compan....
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.... the case of M/s G.S. Homes & Hotels P. Ltd. vs. DCIT in Civil Appeal No.(s) 7379-7380 of 2016 vide order dated 9th August, 2016 the Hon'ble Apex Court had held that share capital receipt from various shareholders cannot be treated as business income. Further learned counsel referred to several case laws as under : i) Delhi High Court judgement in the case of CIT vs. M/s Fair Finvest Ltd. (2012) 83 CCH 0265. ii) Calcutta High Court judgement in the case of CIT vs. General Industrial Society Ltd. (2013) 71 CCH 0296. iii) ITAT Bombay G-Bench decision in the case of Green Infra Lt. Vs. ITO in ITA No. 7762/Mum/2012 dt. 23rd August, 2013. iv) Bombay High Court judgement in the case of Idea Cellular Ltd. vs. Union of India & Ors. In WP (LODG) No. 1462 of 2013 dt. 21st Sept., 2013. v) Delhi High Court decision in the case of Addl. CIT vs. OM Oils & Oil Seeds Exchange Ltd. 152 ITR 552. vi) Madhya Pradesh High Court judgement in the case of CIT vs. Rajaram Maize Products 234 ITR 0667. vii) Bombay High Court judgement in the case of Vodafone India Services Pvt. Ltd. vs. Addl. CIT 368 ITR 01. viii) Bombay High Court decision in the case of Prashant Joshi vs. ITO, 324 ITR 154. ....
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....Once the authorities have got all the details, including the names and addressed of the shareholders, their PAN/GIR number, so also the name of the Bank from which the alleged investors received money as share application, then, it cannot be termed as "bogus". The controversy is covered by the judgements rendered by the Hon'ble Supreme Court in the case of Lovely Exports Pvt. Ltd. vs. CIT (2008) 216 CTR (SC) 195, as also by this Court in CIT vs. Creative World Telefilms Ltd. (2011) 333 ITR 100 (Bom). In such circumstances, we are of the view that the Tribunal's finding that there is no justification in the addition made under section 68 of the Income Tax Act, 1961 neither suffers from any perversity nor gives rise to any substantial question of law...." The above case laws have been referred only for the proposition that if the shareholders are found to be not having adequate means, the addition can be made in the hands of the shareholders only and not the assessee company. Though it is noted that in the present case no finding has been given that the shareholders/share applicants are not unidentifiable or bogus, in fact the AO has also referred to statement on oath from the share....
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....er section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992);] 51[(iiie) any profit on the transfer of the Duty Free Replenishment Certificate, being the Duty Remission Scheme under the export and import policy formulated and announced under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) ;] 52[(iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession ;] 53[(v) any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from such firm : Provided that where any interest, salary, bonus, commission or remuneration, by whatever name called, or any part thereof has not been allowed to be deducted under clause (b) of section 40, the income under this clause shall be adjusted to the extent of the amount not so allowed to be deducted ;] 54[(va) any sum, whether received or receivable, in cash or kind, under an agreement for- (a) not carrying out any activity in relation to any business; or (b) not sharing any know-how, patent, copyright, trade-mark, licence, franchise or an....
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....d to as "speculation business" ) shall be deemed to be distinct and separate from any other business. 14. A reading of the above makes it clear that section 28 refers to the profits and gains of business or profession. It sets out the income which are chargeable to income-tax under the head "profits and gains of business or profession" and clause (iv) thereto states that the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession. A plain reading of this provision shows conditions precedent for such taxability i.e. (1) that there should be benefits or perquisites; and that (ii) such benefits or perquisites should arise from the business or exercise of the profession. The expression 'arising from the business' essentially implies that the benefit or perquisite must be in the nature of a business receipt or revenue receipt. No matter how wide be the scope of section 28(iv), the difference between capital receipt and revenue receipt cannot be overruled. One must bear in mind the fact that section 28 only refers to the 'income' which can be charged to income tax under the head 'profits and gains from business or....
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....ctional High Court. This view has recently been affirmed by Hon'ble Apex Court in the case of M/s G.S. Homes & Hotels P. Ltd. vs. DCIT in Civil Appeal No.(s) 7379-7380 of 2016 vide order dated 9th August, 2016. The Hon'ble Apex Court expounded as under : " We modify the order of the High Court by holding that the amount (Rs.45,84,000/-) on account of share capital received from the various share-holders ought not to have been treated as business income. The High Court, therefore, in our considered view, fell into error in reversing the order of the Tribunal on the aforesaid issue." In the aforesaid case Karnataka High Court had held following the case of Shree Nirmal Commercial Ltd. 193 ITR 694 (Bom.) and 213 ITR 361 (FB) that both the capital and refundable deposits received by Housing Company from its shareholders in consideration for allotting areas to them is assessable as business profits. 19. In this regard we may also gainfully refer to Hon'ble Bombay High Court decision in the case of Idea Cellular Ltd. vs. Union of India (supra). In this case the Hon'ble Bombay High Court has referred to the assessee's contention that the benefit which arises on capital account canno....