2019 (5) TMI 952

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....Tribunal dated 27.8.2018 by which, the learned Tribunal allowed the Assessee's Appeal for the Assessment Year 2014-2015 and held that Section 56(2)(viib) of the Act cannot be invoked in the case of the Assessee for bringing to tax the amount brought into the Assessee Company Mrs.Sasikala Ragupathy, the mother for allotment of Equity Shares in her favour with a very high premium of RS.23.32 Crores on issuance 10,100 Shares at a premium of RS.23.31 crores:- "i) Whether, on the facts and circumstances of the case and in law, the Tribunal was justified in deleting the addition made under Section 56(2)(viib)? ii) Whether on the facts and circumstances of the case and in law, the Tribunal was justified in holding that the pr....

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....extended beyond the legitimate field. But the legal fiction has to be carried to its logical conclusion within the framework of the purpose for which it is created.". Further it is apparent from the Finance Minister's speech that the provisions of Section 56(2)(viib) has been enacted to deter the generation and use of unaccounted money. At this juncture we are also reminded of the decision of the Hon'ble Apex Court in the case Allied Motors Pvt. Ltd., vs. CIT reported in 224 ITR 677, wherein it was held that the Finance Minister's Budget speech explaining the provisions are relevant in construing the provisions. Moreover in the decision rendered by the Hon'ble Jurisdictional Madras High High Court in the case CIT v. Kay Arr ....

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....and there is no scope in the Act to tax when cash or asset is transferred by a mother to her daughter. Hence we hereby direct the learned AO to delete the addition made by invoking the provisions of Section 56(2)(viib) of the Act in the case of the assessee company." 8. In the result appeal of the assessee is allowed." 3. The learned Senior Standing Counsel for the Revenue, Mr.M.Swaminathan submitted that since the shares in question were issued at a premium far in excess of the Fair Market Value of the Share in favour of Mrs.Sasikala Ragupathy, the same was clearly an "Income from Other Sources" in the hands of the closely held Company which is covered by Clause (viib) of Section 56(ii) of the Act. 4. Mr.Vijayaraghavan, lear....

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....n the provisions of Section 56(2)(viib) of the Act which is quoted below for ready reference:- "Income from other sources. 56(1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources", if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to incometax under the head "Income from other sources", namely:- ... ... [(viib) where a company, not being a company in which the public are substantially interested, rec....