INCOME TAX ACT, 1961

Section 56

Income from other sources - Chargeability - Receipt of share capital and share premium -

Assessee filed appeal against the order of AO making addition under the head 'Income from other sources' on account of share premium and share capital without mentioning the relevant section under which the addition was sought to be made.Held: Provisions of section 56(1) are general provisions and gets triggered for a receipt having the character of 'income' under section 2(24) and not getting taxed under Chapters IV-A to IV-E. Though Revenue argued the case on the basis of applicability of provisions of section 68, but that was not the section in which, the addition was sought to be made by AO. Hence it results in a situation wherein, Revenue was only trying to improve the case, which is impermissible in law, as this Tribunal does not have power of enhancement. It was found that the provisions of section 68, either way, falls in Chapter VI under the heading 'Aggregation of Income'. It becomes income of the assessee only by way of deeming legal fiction. The residuary head 'Income from Other Sources' falls in Chapter IV-F of the Act. Hence what is added under section 68 cannot be treated as income from other sources. The provisions of 'Income from Other Sources' starts from section 56 and ends with Section 59. Section 68 of the Act falls in totally different chapter altogether. Further, it is trite law that the receipt of share capital and share premium are only capital receipts, not chargeable to tax at all under any of the provisions of the Act, at least for the year under consideration. Hence, a receipt, once it is not chargeable to tax at all under any of the provisions of the Act, it cannot be brought to tax under the head 'Income from other sources'. Thus, addition made under the head 'income from other sources' was directed to be deleted.

Followed:Vodafone India Services Pvt. Ltd. (2014) 368 ITR 1 (Bom-HC) : 2014 TaxPub(DT) 3959 (Bom-HC)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2008-09

INCOME TAX ACT, 1961

Section 263

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