TaxTMI 
TaxTMI 
2025 (3) TMI 39
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....having regard to the facts and circumstances of the case the Ld. CIT (Appeals) has erred in law and on facts in holding that provision of section 56(2)(viib) are clearly attracted where the equity shares were allotted to the existing shareholders. 2. That having regard to the facts and circumstances of the case the Ld. CIT (Appeals) has erred in law and on facts in upholding & confirming the addition made by Ld. AO Rs. 9,00,000/- on account of excess amount (as excess share premium) received on account of rounded off difference @ Rs. 0.09 (0.09 paisa) on allotment of 1.00 crore equity share to Mr. Hiten Suri and Mr. Sudhir Suri, being the existing shareholders. 3. The appellant craves leave to add, alter, modify and withdr....
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....s than 10%." 4. The Ld. AR further submitted that the 50% of the shareholding is held by non-resident shareholder (foreign body corporate) and 50% shareholding held by Indian shareholders i.e. Mr. Sudhir Suri and Hitin Suri each holding 25% shareholding. He also submitted that assessee maintains regular books of accounts and subject to audit under Companies Act, 2013 as well as under Income Tax Act, 1961. He further submitted that the assessee company issued share @ 3% per shares whereas the valuation of shares as per valuation report was Rs. 2.91 per shares, in order to round off the valuation price Rs. 2.91, these shares were allotted @ Rs. 3 per shares and it means Rs. 2.91 rounded off to nearest rupee i.e. 3/- per shares. 5. The L....
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....per Book, which is reproduced as under: Details of shares held by each shareholder holding more than 5% shares: Class of shares/Name of shareholder As at 31 March, 2017 As at 31 March, 2016 Number of shares held % holding Number of shares held % holding Equity shares with voting rights Total Produce Ireland Ltd 36,258,500 50% 26,258,500 50% Sudhir Suri 18,129,250 25% 13,129,250 25% Hitin Suri 18,129,250 25% 13,129,250 25% Total 72,517,000 100% 52,517,000 100% Reconciliation of the number of shares and amount outstanding at the beginning and at the end of the reporting period: Particulars As at 3....
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....g provisions of Section 56(2)(viib) of the Act threadbare and inter alia observed that the deeming clause requires to be given a schematic interpretation. The transaction of allotment of shares at a premium in the instant case is between holding company and it is subsidiary company and thus when seen holistically, there is no benefit derived by the assessee by issue of shares at certain premium notwithstanding that the share premium exceeds a fair market value in a given case. Instinctively, it is a transaction between the self, if so to say. The true purport of Section 56(2)(viib) was analyzed in Ozone case and it was observed that the objective behind the provisions of Section 56(2)(viib) is to prevent unlawful gains by issuing company in....
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.... Bench has essentially observed that where the allotment has been made to existing shareholders, the deeming provisions of Section 56(2)(viib) would not ordinarily be applicable. This apart, in the instant case, the assessee has also supported the premium determined on issue of shares by DCF Method. Thus, the premium charged is supportable by the valuation report and the premium has been charged to existing shareholder. Thus effectively, the benefit if any arising to the company in turn benefits to the subscriber having pre-existing right in the company. While applying Section 56(2)(viib), the purpose for which deeming provision has been inserted is not achieved in the instant case. Hence, in our view, the conclusion drawn by the CIT(A) can....