TaxTMI 
TaxTMI 
2019 (8) TMI 1404
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....ices. The assessee filed the return of income on 27.09.2011 relevant to the A.Y.2011-12 showing the total income at loss in sum of Rs. 5,79,50,090/-. The return of income was revised on 31.03.2013 u/s139(5) showing the taxable income as nil after claiming the set-off brought forward losses. The return was processed u/s 143(1) of the I.T. Act, 1961. Thereafter, the case was selected for scrutiny and notices u/s 143(2) and 142(1) of the Act were issued and served upon the assessee. The assessee company converted 1,43,33,281/- Preference Shares of Rs. 10 each held by NSR Alpha Mauritius LLC into 57,33,313/- equity-shares of Rs. 10 each at a premium of Rs. 15 per share on 27.05.2010. The conversion was resulted into the gain in sum of Rs. 8,59,99,680/- which was not offered to tax by assessee but has directly credited to the General Reserves under the head Share Premium. It is seen that the investment by NSR Alpha was claimed as in the nature of FDI under automatic route and if that is the case, then as per the FDI norms, the rate of conversion of such preferential shares ought to have been fixed at the time of issue of these preference shares itself. However, no such conversion price ....
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....en so discharged in this case. The nature of receipts is best known to the parties concerned and their failure to establish the true nature thereof, the said receipt is ought to be held as unexplained in the hands of the assessee company only being the recipient thereof. In view of the above, the total gain of Rs. 10,80,94,797/- in the hands of the assessee company claimed as on account of conversion of preference shares but was not substantiated as to its true nature is hereby brought to tax as the unexplained cash credit in the hands of the assessee company u/s.68 and assessed accordingly. Penalty proceedings u/s.271(1)(c) are initiated separately for furnishing inaccurate particulars of income and concealment on the issue. After certain disallowances the income of the assessee was assessed in sum of Rs. 18,16,28,888/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who allowed the claim of the assessee and deleted the addition in sum of Rs. 10,80,94,797/- u/s 68 of the Act, therefore, the revenue has filed the present appeal before us. 6. We have heard the arguments advanced by the Ld. Representative of the parties and perused the record. The Ld. Representati....
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....e company. Valuation of charging of shares premium could not be basis for making addition u/s 68 of the Act. The assessee nowhere credited the cash/sum in the books of accounts which is the essential condition to apply the provisions of u/s 68 of the Act. The assessee submits the certificate obtained from the CA in which the valuation of the share has been duly assessed. The assessee also produced the letter dated 14.06.2010 produced before the RBI and also submitted the certified copy of resolution of Extra Ordinary Meeting of Member's for obtaining consent for conversion which has been marked as annexure-C. The assessee has also produced the concerned letter of preference shareholder for conversion marked as annexure-D. The Ld. Representative of the assessee has relied upon the decision of Hon'ble ITAT in case of DCIT Vs. Piramal Realty Pvt. Ltd. (ITA. No.2317/M/2017) The relevant finding is hereby reproduced as under.:- "5. We have heard rival contentions and gone through the facts and circumstances of the case. The facts of the case are that the assessee company issued 59,850 1% NCCPs having face value of 10/- at a premium of Rs. 99,990/- to PCPL. These shares were issued in ....
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....sion of Co-ordinate bench of Mumbai Tribunal in the case of Pratik Syntex (P.) Ltd. Vs. ITO (2018)94 taxmann.com 12. The Ld Counsel for the assessee Sh Thar explained that the said decision cannot be applied in the present case on facts of the case. He explained that the said decision is rendered on different set of facts as compared to the present case. He stated that the valuation of the share premium is to be looked into for the purpose of section 68 of the Act. The facts in that case were that equity shares were issued in the year under consideration to the promoters as well as three new parties. Both these classes of shareholders were issued equity shares. Promoters were issued shares 11 ITA No. 2317/Mum/2017 at par whereas premium of Rs. 4901- per share was charged from the new parties and for this the Tribunal has made specific note of the following: Despite making such huge investment in the company, the company did not know the whereabouts of those shareholders (para 6, page 10 of the order). Ld counsel stated that no justification for such different issue price even within this relevant year under consideration is brought on record. The Tribunal noted that no doubt the pr....
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....al was accepted wherein tribunal ruled in favour of the assessee by holding that the taxpayer did satisfied all the three ingredients of Section 68 of the Act. 9. Now let us go through the decision relied on by the assessee of Hon'ble Bombay High Court in case of Gagandeep (supra) which reads as under:- "(c) Being aggrieved, the Revenue carried the issue in the appeal to the Tribunal. The impugned order of the Tribunal holds that the respondent assessee had established the identity, genuineness and capacity of the shareholders who had subscribed to its shares. The identity was established by the very fact that the detailed names, addresses of the shareholders, PAN numbers, bank details and confirmatory letters were filed. The genuineness of the transaction was established by filing a copy of share application form, the form filed with the Registrar of Companies and as also bank details of the shareholders and their confirmations which would indicate both the genuineness as also the capacity of the shareholders to subscribe to the shares. Further the Tribunal while upholding the finding of CIT(A) also that the amount received on issue of share capital alongwith the premium recei....
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....ined. We hereunder reproduce the relevant paragraph of the decision of Hon'ble Jurisdictional High Court in ease of Green Infra (supra) for ready reference: 3.Regarding question no.(ii): (a)Before the Tribunal, the Revenue raised a new plea viz. that the so called share premium has also to be judged on the touchstone of Section 68 of the Act which provides for cash credit being charged to tax. The impugned order of the Tribunal allowed the issue to be raised before it for the first time, overruling the objection of the respondentassessee. (b)The impugned order examined the applicability of Section 68 of the Act on the parameters of the identity of the subscriber to the share capital, genuineness of the transaction and the capacity of the subscriberto the share capital. It found that the identity of the subscribers was confirmed by virtue of the Assessing Officer issuing a notices under Section 133(6) of the Act to them. Further, it holds that the Revenue itself makes no grievance of the identity of the subscribers. So far as the genuineness of the transaction of share subscriber is concerned, it concludes as the entire transaction is recorded in the Books of Accounts and reflec....
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....s Assessee's own money which was routed through a third party. Only then can the provisions of section 68 of the Act be invoked. This aspect is considered in the decision of Mumbai Tribunal in case of Green Infra Ltd. Vs. ITO (2013) 145 lTD 240, wherein Tribunal has held that it is a prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of the shareholders whether they want to subscribe to such a heavy premium. The Revenue authorities cannot question the charging of such of huge premium without any bar from any legislated law of the land. The said decision has been affirmed by Hon'ble Jurisdictional high Court in case of Green Infra Ltd (Supra). 14. The Ld. Counsel for the assessee made another argument that the power of carrying valuation is not envisaged by the Legislature for the purpose of Section 68 of the Act. He argued that, wherever the Legislature intended to give the power to determine the value to the AO, it either prescribes Rule for valuation of a particular thing or vested upon the AO the power to refer to the Valuation officer. The power of AO to make a reference to the Valuation Officer is contained in section 1....