TaxTMI 
TaxTMI 
2022 (9) TMI 645
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....aged in the business of construction of residential cum commercial complex. The assessee in the year under consideration has issued shares to the promoter directors as well as to the outsiders. The shares were issued to the promoter directors at Rs.30 per share comprising of Rs.10 face value and Rs.20 towards the premium. The necessary details of the shares issue to the promoter directors stand as under: S. No. Name of shareholder No of share Face value (Rs.) Premium (Rs.) 1. Manshukhbhai Ukabhai Soratia 2,00,000 20,00,000/- 40,00,000/- 2. Vishal Masukhbhai Soratia 1,00,000 10,00,000/- 20,00,000/- Total 3,00,000 30,00,000/- 60,00,000/- 3.1 The assessee, likewise has also issued shares to 10 outside companies in the year under consideration at Rs.500 per share comprising of face value of Rs.10 and premium at Rs. 490.00 only. The necessary details of the shares issued to the outside companies are contained on pages 4 to 5 of the assessment order in tabular form. 3.2 The assessee to justify the amount of share premium filed the valuation report from the qualified chartered accountant namely Busa and Associates, C....
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....sessee was located at the outskirts of Rajkot which is far off by 25 km from the city. In that area, being industrial area, mostly the labour class of people are staying therein and therefore the contention of the assessee that its project is a lucrative is not of any merit. 3.6 During the course of assessment proceedings, there were statements recorded of the directors of the assessee company as well as of the directors of investor companies. The directors of both the company clearly expressed in their respective statements that they were not known to each other which is very unusual. It is for the reason that it is very unlikely that the unknown parties will make such a huge investment in the assessee company at a premium despite the fact known to them that they will not have any controlling stake in the assessee company on the acquisition of shares at high premium. Thus, considering the surrounding evidences, it appears that the investment made by the companies in the assessee company is not genuine being the new entrant in the real estate market. Based on the above, the AO treated the amount of share capital of Rs. 4,50,000/- and its premium of Rs. 2,20,50,000/- issued to th....
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....pient company and the information available with the A.O. that such share application money is only an entry provided by the entry operators. 4.7 When documents like the Memorandum and Articles of Association of the investor companies etc. are produced before the AO, then it is not known on what ground the AO concludes that share capital is bogus. The documentary evidences available with the AO reveal clearly that the investing companies are not 'ghost'. For the AO to come to this definite conclusion, all the above mentioned documentary evidences needs to be disproved, which has not been done. The contentions of the AO did not raise any doubts and suspicions on the introduction of share capital. On the other hand, the appellant has established the identity of shareholders. The jurisdictions I Hon'ble High Court of Gujarat has held in the case of closely held company viz, Hindustan Inks and Resins Ltd. (60 DTK 18) that, once the identity of subscriber is proved, no addition can be made in the hands of the recipient company, j This decision of Hon'ble Gujarat High Court is binding. As the appellant has been able to prove with supporting documentary evidence, ....
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....of 200% to 300% from its project. Furthermore, the worth of assets shown by the assessee in the financial statement of Rs. 20.28 crores, though it is the 2nd year of operation. The learned AR vehemently supported the order of the learned CIT-A. 8. We have heard the rival contentions of both parties and perused the materials available on record. In the instant case the assessee has issued shares at a premium of Rs. 490/- per-share to certain outside private companies. As per the AO the project undertaken by the assessee was not very lucrative and therefore The AO doubted on the genuineness of the premium and share capital issued to the outside companies. Therefore the addition was made by him. First of all, we note that there is no restriction under the Act for the company to issue the shares at premium. It is the decision of the Board of Directors of the company to issue the shares at premium and likewise it is the decision of the subscribers to acquire the shares at a premium. Both the companies and the subscriber of the shares sell and acquire the shares at a premium according to their wisdom. As such, the Revenue is not expected to interfere in the amount of premium issued by....
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....he assessee was lucrative and viable and therefore we reject the finding of the AO. 8.5 The Hon'ble Mumbai ITAT in one of the cases Green Infra Ltd. v. ITO [2013] 38 taxmann.com 253/145 ITD 240 (Mum. - Trib.) examined the question about the application of section 68 of the Act when the company issued shares of Rs 10/- at a premium of Rs 490/- per share. Upon examination, the shareholders were found genuine, existing and verified investment made by them. The Hon'ble ITAT observed that no doubt a non-est company or a zero balance company asking for a share premium of Rs 490/- per share defies all commercial prudence but at the same time the fact cannot be ignored 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 huge premium without any bar from any legislated law of the land. Now we proceed to verify the share capital with premium received by the assessee in the year under consideration. 8.6 The provision of Section 68 of the Act fastens the liability on the assessee to p....
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....advance such loan and having requisite fund in its books of account and banks. The capacity to advance loan can be established by the showing sufficient income, capital and reserve or other fund in the hands of creditor. It is required by the AO to find out the financial strength of the creditor who advanced loan with judicious approach and in accordance with material available on record but not in arbitrary and mechanical manner. 8.12 In the light of the above discussion, we proceed to adjudicate the issue on hand. We find that the assessee during the assessment proceeding has submitted copy of PAN and ITR to prove identity of the creditor company. Likewise to prove genuineness of transaction and credit worthiness, the assessee has furnished ledger copy along with ITR and bank statement demonstrating transaction carried out through banking channel. In addition it was also submitted that all the investor company confirmed and duly complied with the query raised by the AO under the provision of section 133(6) of the Act. Further, the directors of two Investor Companies personally attended the office of the AO for inquiry and confirmed the genuineness of the transaction of share c....