TaxTMI 
TaxTMI 
2026 (5) TMI 473
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....e substantial increase in share capital, large value of international transaction in the nature of guarantee. Accordingly, notices u/s 143(2) and 142(1) of the Act were issued through ITBA portal. In response, ld. AR of the assessee attended and submitted relevant information through e-portal. 3. Assessee is a wholly owned subsidiary of Herba Foods S.L.U. Spain and is engaged in rice milling activities in India. The primary issue raised by the assessee on their grounds of appeal is addition made by the AO u/s 68 of the Act of share capital from non-resident holding company. The relevant facts relating to the above issue are, during assessment proceedings, the AO observed that assessee has received an amount of Rs. 1,34,99,99,904/- (Rs.71,61,32,020/- share capital and Rs. 63,38,67,884/- share premium) on issue of 7,16,13,202 shares during the year. On perusal of the submissions made by the assessee, the AO observed that the shares were issued to following persons:- 4. The assessee was asked to furnish confirmation, bank statement, ITR and Balance Sheet of above-mentioned persons. Further assessee was asked to furnish any other documentary evidence to substantiate its claim of ....
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.... 7. After the issue of new equity shares, the percentage of holding of the existing shareholders remains i.e. 99.99% : 0.01%. Further it was submitted that assessee has issued shares to its related party i.e. Herba Foods SLU Spain and Herba Rice Mills SLU Spain. It was further submitted that assessee has furnished the details relating to equity shares issued to its existing shareholders and it was pleaded that the identity of the foreign entity was duly examined by the TPO while analyzing the related party transactions and TPO has not drawn any adverse inference in relation to the share capital. It was also argued that there was no requirement to prove creditworthiness of shareholders u/s 68 where shareholder is non-resident. It was further submitted that under the provisions to section 68, where the sum credited relates to share application money, share capital, share premium, the assessee shall be required to furnish source of source as well. However, it is clear that the provisions are applicable only to the person who is resident with the provisions of the Act. Therefore, in this case, assessee has received share capital from non-resident shareholder and provisions to sectio....
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....ine after due examination in completed scrutiny assessments." 10. At the time of hearing, ld. AR of the assessee submitted that the shares were issued to the holding company who holds 100% of shares and the holding company is a non-resident. Further he brought to our notice page 2 of the synopsis wherein assessee has submitted detailed submissions before the AO and ld. DRP, he brought to our notice relevant pages of the paper book which was submitted before the AO and various communications between the AO and assessee, also brought to our notice the relevant payments were received thru banking channel and the relevant copies of FIRC was placed in the paper book which he brought to our notice. Further he brought to our notice page 58 of the paper book which is a valuation report. He specifically brought to our notice page 71 of the paper book that the value per share determined by the valuer at Rs. 18.15 per share. He submitted that based on the above valuation, the shares were issued to the existing shareholders. He also brought to our notice page 151 of the paper book which is the shares certificate issue by the assessee to shareholders. He submitted that it is a pure share tra....
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....gorically mentioned and clarified qua the number of shares and the amount invested in the assessee-company. 143-144 iii. The money was received from the non-resident shareholder after compliances with all the norms of FDI Scheme governed by RBI. Necessary filings like Form FC-GRP, etc., before the RBI was duly done by the appellant. Thus, the money has been received after complying with the applicable RBI norms 187-201 iv. Receipt of share capital and premium have been duly disclosed in the audited financial statements 10, 29 V. In financial year 2013-14, equity share capital to the tune of Rs.174.97 crores was raised from the said shareholders itself. The said receipt of share capital was accepted and genuine by the Revenue Department after thorough examination in assessment for AY 2014-15: 57 * The AO, vide notice dated 26.07.2016, required the assessee to file details of the share capital receipt 165-166 * In response thereto, the appellant vide reply dated 29.08.2016 duly submitted the details of the share application money received alongwith Form-2 filed for allotment of shares. 167-177 * Subsequently, on further e....
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....are also placed at pages 187 to 201 of the paper book. From the record, we also observed that the matter was referred to the TPO for international transactions and even TPO has verified the international transactions, has not given any adverse comments. Further we observed that ld. DRP has considered various documents submitted before it and based on the above documents, the ld. DRP has given clear direction to the AO to pass a speaking order. However, we noticed that AO in spite of making due verification, he preferred to follow the findings in the draft assessment order and completed the proceedings. From the facts on record, we observed that the assessee has issued share capital to its own holding company who holds 100% of shareholding in the assessee company, therefore, there is no requirements as far as identity and credit worthiness is concerned. With regard to genuineness, we observed that the funds are routed through banking channel and all the funds were brought to India through proper approval and relevant FIRC Certificate were issued by the bank. Therefore, the assessee has already proved the identity, creditworthiness and genuineness of the transaction. With regard to i....