TaxTMI 
TaxTMI 
2019 (6) TMI 340
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....uring the assessment proceedings, the Assessing Officer noticed that the assessee company collected an amount of Rs. 70,54,53,000/- towards share premium. The assessee received share capital of Rs. 21.09 crores on 16/12/2014 with face value of Rs. 10/- each and with premium of Rs. 990/-. Similarly, on 29/01/2015 received Rs. 50.07 crores, which are issued to M/s Sanofi Synthelabo (India) Limited and M/s Apollo Health & Life Style Limited. The allotment of shares is as under: Date of allotment Name of the allottee No of shares Face value in Rs. Premium in Rs. Share capital in Rs. Security in Rs. 29/01/2015 M/s Sanofi Synthelabo (India) Ltd. 406504 10 1220 4065040 495934880 29/01/2015 M/s Apollo Health & Lifestyle Ltd. 596 10 1220 5960 727120 16/12/2014 -do- 210900 10 990 2109000 208791000 29/11/2014 -do- 3000000 10 Nil 3000000 300 Total 3618000 36180000 705453300 2.2 The Assessing Officer asked the assessee to justify and substantiate with evidences in arriving the share premium of Rs. 990/- and at Rs. 1,220/- in the first year of its ....
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.... to evaluate the shares of the company at a premium, it cannot be evaluated by imaginary/surmises. On one side it has evaluated its shares by following DCF method, while, on the other side it is stating that it need not follow the valuation report. 2.9 According to the AO, the assessee has neither adopted the value of Rs. 741/- reported in the valuation report given by the chartered accountant under DCF method as it was evaluated by its own company nor adopted the method prescribed under the IT Act i.e., Rule 11UA. On the other hand, it has taken a stand that the company is free to determine its own price with the intending purchaser after due negotiations and deliberations. It shows that the assessee company has scant respect for the legislation passed by the Government of India. The intention of the legislation for determination of fair market value of the shares is to curb the misdeeds of the company who will involve in dubious methods for valuation of its shares and also to protect the monies of the investors who invest as a share premium. 2.9.1 In view of the above observations, the Assessing Officer concluded that the valuation report submitted by the assessee for deter....
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....which public are substantially interest within the meaning of Section 2(18)(b)(A) of the Act. The assessee submitted that M/s. Apollo Health and Lifestyle Limited (AHLL) is a wholly owned subsidiary of AHEL, wherein 100% of the shares of AHLL were held by AHEL during the FY 2014-15. Since AHLL is a 100% subsidiary of AHEL (a listed company), AHLL is also a company in which public are substantially interested within the meaning of Section 2(18)(b)(B)(c) of the Act. The assessee is a subsidiary of M/s. Apollo Health and Lifestyle Limited (AHLL) wherein 80% of shares of the assessee were held by AHLL during the FY 2014-15. Since AHLL is a 100% subsidiary of AHEL (a listed company), and the assessee is 80% of subsidiary of AHLL, the assessee satisfies the condition laid down in Section 2(18)(b)(B)(c) of the Act. Hence, the assessee submitted that it is a company in which public are substantially interested within the meaning of Section 2(18) of the Act. 4.2 The assessee submitted that Section 56(2)(viib) of the Act are not applicable where premium on issues of shares is received by a company in which public are substantially interested. The assessee submitted that since specific pro....
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.... BSR Associates pin points the finding that a) The calculation / valuation is made on basis of management assumption b) The calculation / valuation is made for statutory provision of RBI and SEBI. During the appeal proceedings, the appellant was asked to submit the due diligence report on the issue raised by the Assessing Officer regarding the share premium. No such report was submitted before me, hence the finding of the Assessing officer, who is very specific to show that Section 56(2)(viib) is in applicable. On verification, it Is correct that provision of Rule 11UA for the purpose of Section 56 of IT Act, there is prescribed method for valuation of share premium under Rule 11UA(I)(b) for the purpose of Section 56 of Income Tax Act. The Appellant has not accepted the valuation of Rs. 741/given by the Chartered Accountant under DCF Method nor under Rule 11UA of IT Act. It is to be noted that the Income Tax Act is very specific regarding the issue. The appellant may have used negotiations and deliberations during the transactions. But for Income Tax procedures the Rule 11UA will apply. 6.10 In the background of this, the appellant has not been a....
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....ing the returned income of the Appellant. 2. The lower authorities erred in finalizing an order of assessment which suffers from legal defects, such as being passed in violation of principles of natural justice and the provisions of the Act and is devoid of merits and are contrary to facts on "cord and applicable law, and has been completed without adequate inquiries and as such is liable to be quashed. Addition of receipt in the nature of share premium: 3. The law" authorities have erred in law and on facts, in treating the securities premium received by the Appellant ('share premium'), on allotment of its shares during the subject AY, as income taxable under section 56 of the Act. 4. The lower authorities have erred in law and on facts, in subjecting the alleged excess-receipt of share premium to tax, despite concluding that section 56(2)(viib) of the Act dealing with taxability of excess premium received by specified companies for allotment of shares is not applicable to the impugned transaction. 5. The lower authorities have erred in law and on facts, in holding that the Appellant is not free to determine the issue price of i....
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.... an income within the meaning of Section 14 of the Act. For this proposition, he relied on the following case law: 1. Vodafone India Services (P) Ltd., [2014] 368 ITR 1 (Bombay) 2. D.P. Sandu Bros. Chembur (P) Ltd., [2005] 273 ITR 1 (SC) 3. CIT Vs. Allahabad Bank Ltd., [1969] 73 ITR 745 (SC) 4. Nalinikant Ambalal Mody Vs. CIT, [1966] 61 ITR 428 (SC). 9.1 With regard to Section 14A disallowance, he submitted that assessee has not claimed any exempt income. Therefore, the provisions of Section 14A will not apply. 10. Ld. DR relied on the orders of Revenue authorities. 11. Considered the rival submissions and material on record. We noticed that assessee-company is step-down subsidiary of Apollo Hospitals Enterprises Ltd., The AHEL is a listed company in Stock Exchange in India with the Securities Contracts (Regulations) Act, 1956. Therefore, this company falls under the category of the company in which public are substantially interested. The subsidiary companies viz. AHLL and assessee-company come under the definition of Section 2(18)(b)(B) of the Act, as per which public are substantially interested. This fact was also acknowledged by the....