Just a moment...

Top
FeedbackReport
×

By creating an account you can:

Logo TaxTMI
>
Feedback/Report an Error
Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters0/2000
TMI Blog
Home / RSS

2025 (3) TMI 39

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....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 withdraw any grounds of appeal before or during the appellate proceeding....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....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 Ld. DR relied upon the orders of the authorities below. 6. The Ld. AO in his order ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....lding 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 31 March, 2017 As at 31 March, 2016 Number of shares Amount (Rs.) Number of shares Amount (Rs.) Shares outstanding at the beginning of the year 52,517,000 52,517....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....se 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 the garb of capital receipts. In the instant case, not only that the fair market value is supported by independent valuer report, the allotment has been made to the existing shareholder holding 100% equity and therefore, th....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....so 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) cannot be faulted either on facts or in law." 9. The Ld. AR also submitted that the CBDT in order to mitigate the hardship faced from the un-intended consequences of section 56(2)(viib) of the Act read with Rule 11UA, via notificatio....