Revision under Section 263 for share premium under Section 56(2)(viib) - Shares issued to bankers at lower than par value due to distress restructuring

Facts:

Assessee had based on a valuation report issued share to one Prism Cement Ltd. @ Rs. 12/share with Rs. 10 par value and Rs. 2 being the share premium. Due to assessee facing serious financial difficulties certain loans of bankers were converted into equity shares at Rs. 5.3699 per share. The PCIT invoked powers of revision saying that the difference between Rs. 12 and 5.3699 ought to have been added as income taxable under Section 56(2)(viib). Similarly carry forward of past losses were also alleged wrongly set off due to change in shareholding of the closely held assessee company by more than 51% arising post conversion of bank loans into equity. Aggrieved by the revision, assessee went in appeal to ITAT -

Held in favour of the assessee that the addition under Section 56(2)(viib) was not warranted and the carry forward of loss was also done correctly done by the AO. Revision under Section 263 stood quashed.

Case:BLA Power (P) Ltd. v. Pr. CIT 2023 TaxPub(DT) 1466 (Mum-Trib)