TaxTMI 
TaxTMI 
2019 (12) TMI 35
X X X X Extracts X X X X
X X X X Extracts X X X X
....the addition of Rs. 4,31,34,701/- made on account of the difference between the fair market value of the shares and consideration received by the company from the assessee to whom bonus shares issued ignoring the fact that the provisions of section 56(2)(vii)(c) are squarely applicable to the case of the assessee. The Ld. CIT(A) has failed to appreciate that on contrary, the market value of shares has increased to Rs. 1250/- per share on 29.03.2014, just two days after issue of Bonus shares. 2. Briefly stated facts of the case are that the assessee, an individual, is director in some companies of "Bestech Group", including the company M/s Bestech India Private Limited. A search and seizure action under section 132 of the Income Tax Act, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to Income-tax under the head 'Income from other sources' in the hands of such individual or HUF in the relevant assessment year. The Assessing Officer accordingly, computed the fair market value of the bonus shares under Rule 11U and 11UA of the Income Tax Rules at Rs.4,31,34,701/- and made addition accordingly. On further appeal, the Ld. CIT(A) deleted the addition following the decision of the Tribunal in the case of Sudhir Menon, HUF Vs ACIT, Mumbai in ITA No. 4887/Mum/2013 for assessment year 2010- 11, observing as under: "6. Decision:- I have perused the assessment order passed by the AO and submissions of the appellant. During the year, the appellant has received bonus shares from M/s Bestech India Pvt. Ltd....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t consideration or at a price lower than the fair market value does not attract the anti-abuse In order to prevent the practice of transferring unlisted shares at prices much below their fair market value, it is proposed to amend section 56 to also include within its ambit transactions undertaken in shares of a company ( not being a company in which public are substantially interested) either for inadequate consideration or without consideration where the recipient is a firm or a company (not being a company in which public are substantially interested). Section 2(18) provides the definition of a company in which the public are substantially interested. It is also proposed to exclude the transactions undertaken for busines....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e was discussed in detail by Hon'ble ITAT Mumbai Bench in the case of Sudhir Menon 1IUF vs Astt. CIT- 21(2), Bandra Mumbai For AY 2010-11 in ITANo. 4887/Mum/2013 and the relevant observations are reproduced as below:- (i) The provisions of section 56(2)(vii) of the Act would not apply to bonus shares, and the argument alluding thereto arises only on account of mis -conception in respect thereof. (ii) Issue of bonus shares is by definition capitalization of its profit by the issuing company. There is neither any increase nor decrease in the wealth of shareholder (or of the issuing company) on account of a bonus issue and his percentage holding therein remains constant. (iii) What in effect transpires is that a ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....property therein is comprised in the existing shareholding of the allotee. There is as such no case of a gift, the shareholder only receiving his own property. (vii) No property however being passed on to the assessee in the instant case, i.e. cn the allotment of the additional shares, no addition in terms of the provision itself shall arise in the facts of the case. Thus from the above discussion, it is clear that issue of Bonus Shares was never envisaged to be taxed under the provisions of section 56(2)(vii) introduced in Finance Bill 2010. Further, the judgment discussed above further elaborates as to how the provisions of section 56(2)(vii) of the Act would not apply to bonus shares. Thus, it is clear, that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... vs. ACIT (supra), in which it was held that provisions of Section 56(2)(vii)(c) of the I.T. Act, would not apply to bonus shares. The ITAT, Delhi Bench in the case of Meenu Satija, New Delhi vs. Pr CIT (Central), Gurgaon (supra), on identical facts quashed the proceedings under section 263 of the l.T, Act. Therefore, ratio of the decision of the Tribunal in the case of Meenu Satija, New Delhi vs. Pr. CIT (Central), Gurgaon (supra), squarely apply to the facts and circumstances of the case. Whether this order have been passed under section 263 or merit would not make any difference. The principle of law have been clearly decided in favour of the assessee on the identical facts. The Tribunal has also relied upon the decision of Mumbai Bench ....