TaxTMI 
TaxTMI 
2021 (6) TMI 500
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....not applicable. 3. The Ld.CIT(A) erred in concluding that assessee company is a deemed public limited company without giving an opportunity to the Assessing Officer to verify claims of assessee with regard to NCC Infrastructure Holding Limited being deemed public limited company because of NCC Limited which is a listed company held more than 40% shares of NCC Infrastructure Holding Limited during the year under consideration. 4. The Ld.CIT(A) erred in concluding that assessee company is a deemed public limited company ignoring the fact that assessee claimed before the Assessing Officer that NCC Infrastructure Holding Limited is a public limited company but not deemed public limited, which fact was first brought before Ld.CIT(A) and Assessing Officer had no chance to verify. 5. The Ld.CIT(A) erred in concluding that assessee is a deemed public limited company ignoring the fact that the Assessing Officer has no occasion to verify whether NCC Infrastructure Holding Limited, NCC Limited qualify to be public limited companies as per provisions of Section 2(18) in order for assessee to be qualified as public limited company. 2.1. Both the learned representat....
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.... unjustified/ arbitrary and is resentful that in this case the Id. AO has carried such additions inter-alia - a.) By transgressing the express language of section 56 (2) (viib) of the Act. b) By conveniently side-stepping the key legal claim of the appellant, if only was fairly considered, would have avoided the protracted litigations. c) By overlooking the case facts as discernable from evidences placed on record and also from the details as verifiable from documents as available in public domain. d) By not providing an opportunity to the appellant to exercise its options as per Explanation (a)(ii) to section 56(2) (viib) of the Act. e) In gross denial of principles of natural justice because in this case no show- cause notice indicating the grounds for making an addition to the returned income of the appellant was issued before passing the assessment order and carrying the prejudicial additions to the returned income. 4. Considering the above aspects, it would not be a misnomer to comment that in the current case the ld.AO has carried the addition under section 56(2) of the Act with the predetermined mindset to tax the realiza....
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....le about the share holding pattern of afore referred companies in public domain. Pertinently the tax audit report which supports the return of income of the appellant, at clause 29 of the report wherein the details of transaction of share issue at premium referred to in section 56 (2) (viib ) of the Act the tax auditor has asserted 'no' and 'nil'. This evidence also advances force to the contention of the appellant being that provisions of section 56 (2)(viib) are not applicable to the assesse company to any of its allotments. 5.4 For the sake of completeness and in order to establish beyond doubt that assesse company is a 'company in which public. is substantially interested', the conditions as mentioned under section 2 (18) of the Act are run through hereunder in respect of NCC Power Projects Ltd [i.e. assesse company}., NCC Infrastructure Holdings Ltd (holding company of assesse company) and NCC Ltd ultimate holding company). For this purpose, relevant portion of the section is quoted hereunder: Section 2 (18) (b) if it is a company which is not a private company as defined in the Companies Act, 1956 (1 of 1956), and the conditi....
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....will be applicable as per the explanation to the Section 2(18) of the Act. Since greater than 40% of voting power in assessee company is held by a NCC Infrastructure Holdings Ltd. i.e. a company to which the clause (b) to subsection 18 of section 2 is applicable, accordingly the status of assessee company is a 'company in which public is substantially interested' All in all, since assessee company is conclusively established to be 'company in which public is substantially interested' as per section 2(18) of the Act, since the provision of Section 56(2)(viib) expressly states that the same is applicable to "company not being a company in which the public are substantially interested' , the provisions of Section 56(2)(viib) cannot be applied to any of the allotments made by the assessee company during the financial year 2013-14 even though the allotment could have been made at a price greater than fair value of such shares as worked out as per any of the methods prescribed under section 56 (2) (viib) of the Act read with rule 11 UA of Income Tax Rules. On this short ground alone, the additions carried under section 56 (2) (viib) of the Act must be deleted....
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....e language used in referred section sufficiently ensures that a fair chance to substantiation is available to the assesses's to substantiate the allotment price under clause (a)(ii) to explanation appended to section 56 (2)(viib) of the Act before any prejudice is sustained in their case. 6.3 Now in this case during the course of assessment proceedings, it was craved before Id.AO that price at which the shares were issued to shareholder Gayatri Energy Ventures Pvt. Ltd is Justified in view of the business considerations. Further value as per the request, FMV as per net asset method of rule 11 UA was worked out and provided in submissions. Unfortunately in the current case Id.AO simply carried the additions to the returned income by working the addition based on difference between the issue price and fair market value as per "the net asset value method without appreciating the fact that said method is just one of the method is net asset value method prescribed under rule 11 UA and in the interest of fairness, it was essential to provide the appellant an opportunity to exercise the options prescribed under Explanation (a)(ii) to section 56(2)(viib) of the Act. Not only t....
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....i} Existence of various business I commercial rights in the assessee company contributed to the substantial increase in the market value of shares. Apart from above, appellant also owned various immovable properties. (iii) Further the risk as assumed by NCCI in the power project was higher as compared to what was going to be assumed by the new promoter being Gayatri Infra. At the time of execution of share purchase agreement, the essential wherewithal's to development of power project viz. sourcing of inputs, loan finance, land, clearances and approvals, power sale contracts, were already in place with the project having reached the plug and play mode'. Naturally therefore, for businesses seeking to venture in to infrastructure, making investment in Assessee Company was lucrative option as now on as a venturer one has to assume only of Operations, commercial and legal risk because the project had already surpassed the biggest risk specific to power sector entities being the development risk. 6.5 Considering the above aspects, it is respectfully submitted that in view of the clause b to explanation to section 56 (2) (viib) of the Act, transaction of issue o....
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....ucture sector. The ultimate holding company of both of these groups are listed on various recognized stock exchanges. In such a scenario wherein the allotment is decidedly agreed at a particular value between two equals, one can logically rule out any possibility of unjust enrichment to be the intention in issuance of shares at premium by either of the parties. c. The value of premium charged is not exorbitant and it is only 34 percent of the face value. 7.3 The appellant requests your honor to kindly consider the above bonafide aspects to kindly vacate the addition made under section 56 (2) (uiib] of the Act because the transaction falls beyond the periphery apparent form the legislative intent with which the section was introduced Amalgamation The appellant Company invites attention to the fact that Sembcorp Gayatri Power Limited has been amalgamated with and into the appellant Company vide sanction order of the Regional Director, South East Region, Hyderabad dated 31s! October, 2018 with effect from the appointed date of Is! April, 2018. The appeal was originally filed by Sembcorp Gayatri Power Limited only. However, Sembcorp....
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....Apollo Hospitals Enterprise Limited (AHEL) is a parent company which is a public company listed on the Bombay Stock Exchange (Security Scrip: APOLLOHOSP) and the National Stock Exchange (Security Scrip: APOLLOHOSP). Since Apollo Hospitals Enterprise Limited (AHEL) is a listed company, the same is a company in 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 ....
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....r the title to, or liabilities against ASCL ... .. ..... valuation carried out by us is solely for regulatory /nonfinancial reporting purposes and it is the prerogative of the parties to the transaction to decide the transaction price". The above extracts from the findings of the Assessing Officer and the submissions made by the 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 11 UA for the purpose of Section 56 of IT Act, there is prescribed method for valuation of share premium under Rule 11 UA(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 Account....
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....y 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 Assessing Officer in his order at Pg. 6, para 3.2 as it was agreed that the assessee's case does not fall u/ s. 56(2)(viib). In order to invoke the provisions of Section 56(2)(viib), the assessee-company should be a company in which public are not substantially interested. 11.1 The Assessing Officer instead of invoking Section 56(2)(viib), he went ahead by disallowing the excess of the premium received by assessee by invoking the provisions of Section 56(1) of the Act. In order to invoke Section 56(1), the income earned by the assessee should be classified as revenue income as per Section 14 but should not fall within any of the head of income A,C,D or E. Since section 56(1) is residuary head of income, it falls in the head of income 'F' i.e. "income from other sources". This head of income consists of two parts i.e. section 56(1) and section 56(2). The first part i.e. sub-section (1) deals with income of every kind, which does not fall in any of the head of income A- E a....
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....d addition made by the Assessing Officer in his regular assessment framed on 29.10.2017 thereby holding that M/s NCC Infrastructure Holding Limited, qualified to be a public limited company(ies) merely because NCC Ltd (a listed company) held more than 40% of the former's shareholding in the relevant previous year. His further case is that the assessing authority did not have any occasion even to verify fulfillment of necessary conditions in this regard on account of the fact that the assessee has raised the corresponding plea for the first time before the CIT(A). 3.1. We find no merit in Revenue's foregoing arguments. The assessee has filed a detailed paper book running into 99 pages . Page 11 thereof and more particularly page 13 para 9.1 and page 18 are its detailed submissions dated 20.11.2017 and 26.12.2017 before the Assessing Officer himself that section 56(2)(vii)(b) did not apply in view of sec.2(18) containing definition of a "company". The Revenue's technical argument that the CIT(A) has not offered any opportunity whilst entertaining the assessee's argument to this effect goes against the records. The same stands rejected therefore. 4. Next comes the issue whether ....