INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Receipt of share premium - Identity, creditworthiness and genuineness of share applicant proved

Assessee had received share capital of Rs. 14 lakhs from two shareholders and Rs. 2 crores from the very same shareholders towards share premium. Share capital received by the assessee had been duly accepted by AO, however, share premium component was subjected to addition under section 68 on the ground that summons issued under section 131 did not find compliance from directors of assessee-company and also assessee did not produce the directors of investor companies before AO.Held: Assessee had furnished documents share application form for equity shares, share allotment advice, in respect of accounts from which share application monies were paid, Board resolution for making investment in assessee company, and address of share subscribers. All the share subscribers were duly assessed to income-tax and transactions with assessee company were duly routed through banking channels and were duly reflected in their respective audited balance sheets. Thus, identity, creditworthiness of share subscribers and genuineness of transactions stood duly proved. Also, notices issued under section 133(6) had been duly complied with. Once receipt of share capital had been accepted as genuine within the ken of section 68 there was no reason for AO to doubt share premium component received from the very same shareholders as bogus. Further, definition of 'income' as provided under section 2(24) at the relevant time did not define as income included any consideration received for issuance of share in excess of its fair market value. This came into statute only with effect from 1-4-2013 and thus, would have, no application to the share premium received by assessee in the year, i.e., assessment year 2012-13. Therefore, addition made under section 68 was deleted.

Relied:Pr. CIT v. Apeak Infotech (2017) 88 Taxmann.com 695 (Bom) : 2017 TaxPub(DT) 4092 (Bom-HC), dt. 8-6-2017, CIT v. Tata Chemicals Ltd. (2002) 122 Taxman 643 (Bom) : (2002) 256 ITR 395 (Bom.) : 2002 TaxPub(DT) 1317 (Bom-HC), Major Metals Ltd. v. UOI (2012) 207 Taxman 185 (Bom) : (2013) 359 ITR 450 (Bom) : 2012 TaxPub(DT) 21113 (Bom-HC). Distinguished:Novo Promoters and Finelease (P) Ltd. (2012) 342 ITR 169 (Del) : 2012 TaxPub(DT) 1558 (Del-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13

INCOME TAX ACT, 1961

Section 14A

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