TaxTMI 
TaxTMI 
2020 (5) TMI 136
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....cumstances of the case and in law, the Ld. CIT(A) was erred in directing the deletion of the sum brought to tax by the AO as unexplained income under Section 68 of the Income Tax Act, 1961 in respect of moneys credited in the books as share premium of Rs. 7,30,78,750/- 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was erred in holding that the assessee proved identity, creditworthiness and genuineness of moneys credited in the books as share capital, including share premium, of Rs. 7,30,78,750/-, just by submitting PAN, and acknowledgement of income-tax returns of the share holders, and that the share premium has been received through banking channel and duly supported by the board resolutions filed by the assessee company with Registrar of Companies(RoC). 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was erred in holding that receipt of share capital / premium is capital in nature and thus cannot be brought to tax under section 68 of the Income - tax Act 1961 by relying on decision of Hon'ble Bombay High Court in the case of Vodafone India Services Pvt. Ltd. Vs. Union of India & Ors [368 ITR ....
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....ders are proofed. Vide letter dated 26.03.2015 assessee further submitted that: That the company's book values of the Equity Shares as on 31.03.2011 was Rs. 91/- per share for the face value of Rs. 10/- per share which has been calculated as under: Share capital as on 31.03.2011 2848000.00 Reserve and Surplus 23138135.00 Total : 25986135.00 No. of shares as on 31.03.2011 284800 Book Value per share 91.24 That the fund of the company valued upto 31.03.2011 was invested in the group companies namely: • Vandana Ispat Limited • Vandana Vidhyut Limited • Vandana Energy and Mineral Limited • Vandana Ispat & Power Limited In the particular company Vandana Ispat Limited this company continuously earning good profit and therefore increase the value of book value. In the case of Vandana Vidhyut Limited currently there is an 8MV Bio Mass plant and further expansion of thermal power plant of 540 MV. In this company also the profit is to be expected in long term. Balance Sheet as on 31.03.2011 of Vandana Ispat Limited and Vandana Vidhyut Limited is enclosed herewith for ready reference. Therefor....
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....0/-per share and copy of resolutions passed by share applicant companies to subscribe the equity shares of Rs. 190/each at a premium of Rs. 190/-per share." 6. Thereafter Ld CIT(A) noted that share price is a business consideration and the assessing officer cannot step into the shoes of businessman. In this regard Ld CIT(A) relied upon several case law. He further noted the following submissions of the assessee to buttress the point :- "The appellant has further submitted that the Company is presently having investment activity. The Company is reporting loss because it is valuing investments at book value. Whereas, the intrinsic or fair market value is much more. While issuing shares, fair market value of the assets has to be taken into account and the person paying the premium has factually benefited from the purchase of shares at premium. The Appellant had, during the course of assessment, given the fair market value of the investment held which proves the reasonableness of the premium. The loss is only a loss as per accounts as maintained as per Companies Act and as required by the Income Tax Department .This is by precedent and accounting standards, the valuation of....
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....evidence to show that the explanation of the appellant is not correct. The AO has only raised the issue of unreasonableness of the amount of premium so received by the appellant @ Rs. 190/- per share. Therefore, the AO is not justified in making the addition u/s 68 of the IT Act. As regards, the premium charged by the appellant is concerned; the AR submitted that the company is presently having investment activity. The Company is reporting loss because it is valuing investments at book value, whereas, the intrinsic or fair market value is much more. While issuing shares, fair market value of the assets has to be taken into account and the person paying the premium has factually benefited from the purchase of shares at premium. The Appellant had, during the course of assessment, given the fair market value of the investment held which proves the reasonableness of the premium. As observed above, the AO has not doubted the genuineness of the receipt of the share premium but he formed the opinion that the exorbitant rate of share premium fixed by the appellant company and treated the same as taxable income. In this regard, CBDT Instruction No. 2/2015 dated 29.01.2015 ....
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....ay HC) and jurisdictional ITAT "G" Bench decision in the case of Green Infra Ltd. ITA No. 7762/Mum/2012 dated 23.8.2013. In view of the above facts and circumstances of the case, I am of the considered opinion that share premium amount received by the appellant is in the nature of capital and same cannot be assessed u/s 68 of the IT Act and therefore addition made by the AO is deleted. Grounds 1 to 11 are, therefore, allowed." 8. Against the above order revenues in appeal before us. 9. We have heard both the Council and perused the records .learned departmental representative relied upon the grounds of appeal and the order of the assessing officer. The learned DR further placed reliance upon following case laws :- • Pr.CIT Vs. NRA Iron & Steel Pvt. Ltd.(Civil Appeal No. 29855 of 2018)(SC) • Pr. CIT Vs. NDR Prompters Pvt. Ltd. (ITA No. 49 of 2018)(Delhi High Court) • CIT Vs. Navodaya Castle Pvt. Ltd. (367 ITR 306)(Delhi) • Novodaya Castle Pvt. Ltd. Vs. CIT (2015-TIOL-314-SC-IT) (SC) • CIT Vs. MAF Academy(P) Ltd. (361 ITR 258) • Rick Lunsford Trade & Investment Ltd. Vs. CIT (385 ITR 399) â€....
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....on for share premium. In this regard by referring to the observations about shell companies the assessing officer has contradicted himself by observing that the source of fund is duly explained. It is quite settled that in shell companies there is doubt about the source of funds. As regards the reliance of the assessing officer on the decision of Major Metals (supra) is concerned the same was with respect to the order of the settlement commission wherein the veracity of the funds were in doubt and in those circumstances honourable jurisdictional High Court has upheld the order of the settlement commission with regard to the absence of genuineness of the source of share premium. In the present case we note that assessee has duly submitted all the necessary documents for the verification of the identity creditworthiness and genuineness of the share applicants as evident in the order of learned CIT(A) noted in paragraph 5 above. 12. As regards the examination of justification of share premium is concerned it is noted that the concerned provision in income tax law was brought into statute books in the form of section 56 (2)(vii)(b) . This was with effect from 2013-14. Honourable jur....
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....ble or bogus. High Court found that the impugned order of the Tribunal upheld the view of the CIT(A) to hold that share premium is capital receipt and therefore, cannot be taxed as Income, This conclusion was reached by the impugned order following the decision of this Court in Vodafone India Services Pvt. Ltd. (supra) and of the Apex Court in M/s. G.S. Homes and Hotel P. Ltd. (supra). In both the above cases the Court has held that the amount received on issue of share capital including premium are on capital account and cannot be considered to be income. It was further pertinent to note that the definition of income as provided under Section 2(24) of the Act at the relevant time did not define as income any consideration received for issue of share in excess of its fair market value. This came into the statute only with effect from 1st April, 2013 and thus, would have, no application to the share premium received by the Respondent - Assesses in the previous year relevant to the assessment year 2012 - 2013. Similarly, the amendment to Section 68 of the Act by addition of proviso was made subsequent to previous year relevant to the subject Assessment year 2012-13 ....