TaxTMI 
TaxTMI 
2023 (10) TMI 1197
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...."the Act"] for Assessment-Year ["AY"] 2017-18, the assessee has filed this appeal on following effective grounds: 1. That the Ld. CIT(A) erred in not considering the fact that shares are issued in compliance with the provisions of Section 56(2)(viib)of the Income-tax Act, 1961, and the issue price does not vary from FMV materially. 2. That the Ld. CIT(A) erred in not considering the fact that the valuation is an estimation and provisions of section 56(2)(viib) are not violated only because of rounding off done for practical purposes." 2. Heard the learned Representatives of both sides at length and case records perused. 3. The assessee is a company which issued 1,96,308 equity shares @ Rs. 20 per share (face value of....
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...., the CIT(A) rejected assessee's submissions and held that the section 56(2)(viib) concerning with the issue of shares does not have any provision or scope for rounding off; accordingly, he upheld the addition made by AO and did not grant any relief. 5. Still aggrieved, the assessee has come in next appeal before us. 6. Ld. AR for assessee argued on the same line of reasoning as made by assessee in first appeal before CIT(A), namely (i) the assessee collected Rs. 20/- per share instead of Rs. 19.23 per share for simplicity; (ii) the difference of Rs. 0.77 is very nominal, negligible and immaterial which should not be viewed otherwise, more particularly when the provisions of section 50C and 56(2)(vii) of Income-tax Act also recognize ....
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....here the Parliament has not prescribed. He submitted that if materiality or rounding off is allowed on emotional basis, it can lead to anywhere, even a situation where the department would have to suffer huge tax loss in a case where issue size is high. Therefore, the claim of assessee should not be allowed. 9. Ld. DR also relied upon two direct decisions, one of ITAT, Mumbai and other of ITAT, Kolkata. He submitted that ITAT "SMC" Bench in Royal Accord Realtors (P) Ltd. Vs. DCIT (2022) 195 ITD 287 has rejected assessee's claim of rounding off even in rupee terms. The relevant paragraphs of the decision to which our attention had been drawn, are reproduced: "6. Au Contraire, Shri T. Shankar representing the Department vehemently....
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....all be chargeable to income-tax under the head "Income from Other Sources", Xxxxxxxxxxxx Xxxxxxxxxxxx xxxxxxxxxxxx (viib): where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares" On a plain reading of the section it emanates that addition u/s. 56(2)(viib) is made where the consideration for issue of shares exceeds fair market value of the shares. There is no ambiguity in understanding the provisions on bare perusal. The ld. Representative ....
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.... of Kolkata Bench in the case of Shresth Dealers Pvt. Ltd. Vs. ITO (supra) deals with exactly the same issue as in the instant appeal. The Co-ordinate Bench after considering the facts and the provisions of section 56(2)(viib) of the Act held as under: "4. I have heard the arguments of both the sides and also perused the relevant material available on record. The learned counsel for the assessee has submitted that the fair market value of the unquoted equity shares sold by the assessee was Rs. 98.61 per share and the same was rounded off by the assessee to Rs. 100/-. He has contended that even if the valuation so rounded off at Rs. 100/- may not be acceptable, the value as rounded off of to next rupee that is Rs. 99 should be adopt....
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....would result in absurd construction of provision. In the instant case the provisions of section 56(2)(viib) of the Act or Rule 11UA nowhere provides for rounding off to nearest rupee or multiple of ten or hundred. The provisions are plain, clear and unambiguous. Thus, in the light of above observation, the impugned order is upheld and the appeal by assessee is dismissed." 10. Ld. DR submitted that the aforesaid decision of ITAT, Mumbai "SMC" has, in Para No. 11, followed another decision of Hon'ble ITAT, Kolkata "SMC" in Shresth Dealers Pvt. Ltd. Vs. ITO, ITA No.2517/Kol/2018 wherein also the rounding off was very much rejected in the matter of section 56(2)(viib). 11. We have considered rival submissions of both sides and carefully p....