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Tax Publishers
Additions under section 56(2)(viia)(ii) in a
negative net worth as per Rule 11U(1)
Facts:
Assessee
had invested in an entity at Rs. 104 per share (Rs. 10 par value and Rs. 94
being Share premium). On inquiry the fair market value of the share was held to
be at 148. The difference between (148-104) = Rs. 44/share was added to
the income of the assessee under section 56(2)(viia)(ii). Factual computation
under IT rule 11U(1) meant the investee entity had a negative net worth of
Rs. 341 per share. Based on the negative net worth CIT(A) reversed the proposed
addition of the AO. On further appeal by the revenue -
Held
against the revenue that the addition was unwarranted.
Ed. Note:
The fair market value being more than the invested value vis a vis the income tax
rules is to be noted. The Income tax rule on this front needs a revisit
legislatively.
Case: ITO v. Soma Warehousing Corporation 2023 TaxPub(DT) 3816 (Del-Trib)
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