The Tax Publishers2021 TaxPub(DT) 0044 (Karn-HC) : (2021) 431 ITR 0250

INCOME TAX ACT, 1961

Section 56(2)(vii)

The receipt of bonus shares by assesseee could not be treated as income from other sources under section 56(2)(vii) as when there is an issue of bonus shares, the money remains with the company and nothing comes to the shareholders as there is no transfer of property.

Income from other sources - Transfer of property without consideration - Receipt of bonus shares -

AO noticed that assessee had received bonus shares and therefore, he invoked section 56(2)(vii) and treated the receipt of bonus shares as income from other sources and assessed the fair market value of the bonus shares. Held: In the instant case, there is no material on record to infer that bonus shares have been transferred with an intention to evade tax, which is the object of the provision in question. Therefore, when there is an issue of bonus shares, the money remains with the company and nothing comes to the shareholders as there is no transfer of the property and the provisions of section under section 56(2)(vii)(c) were not attracted to the fact situation of the case.

REFERRED :

FAVOUR : In favour of assessee.

A.Y. : 2012-13



IN THE KARNATAKA HIGH COURT

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