TMI Blog2018 (7) TMI 2342X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee in respect of remittance received by him. From the record, we also found that the assessee company has received 2 letters of confirmation in respect of money paid by Sweden Company towards share application for investment in shares of the assessee company. Basis of premium was not required till AY 2012-13 and amendment about basis of premium on allotment of shares came thereafter. Moreover the Assessee was a subsidiary of the company to whom shares were allotted. Reasons for premium has been elaborated vide letter filed with the AO during the assessment proceedings. We observe that there was property justification for the shares issued to holding company at premium of Rs. 10.00 per share. No merit for the addition so made by the AO. Decided in favour of assessee. - SHRI R.C. SHARMA, AM AND SHRI RAM LAL NEGI, JM For the Assessee : Shri Firoz Andhyarujina and Shri Vimal Punamiya For the Revenue : Shri V. Jusin ORDER PER R.C. SHARMA (A.M.): This is an appeal filed by the assessee against the order of CIT(A)-18, Mumbai dated 17/01/2017 for the A.Y. 2012-13 in the matter of order passed u/s. 143(3) of the IT Act. 2. In this appeal, assessee is aggrieved for addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d only shares were allotted to applicants during assessment year under appeal, provisions of section 68 could not be invoked to make addition III. Section 68 of the Income-tax Act, 1961 - Cash credits (Share application money) - Assessment year 2006-07 - During assessment year 2005-06 assessee received share application monies from 20 individuals but shares were allotted to them during assessment year under appeal - Whether since no monies were received during assessment year under appeal there was no scope for invoking provisions of section 68 - Held, yes [Para 4.4.1] fin favour of assessee 2. [2014] 225 Taxman 190 (Gujarat)(MAG.) CIT vs. Jagatkumar Satishbhai Patel Akil Kureshi, J 1. Revenue is in appeal against the judgment of the Income-tax Appellate Tribunal, Ahmedabad [hereinafter referred to as, the Tribunal ] dated 16th November, 2011, raising following substantial question of law for our consideration : Whether on the facts and circumstances of the case, the Hon'ble Tribunal was justified in reversing the order of CIT (A) in deleting the addition of Rs. 10,09,000/- on account of unexplained cash credit under Section 68 of the Act considering major amount of cash credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer made addition of that amount under section 68 - On appeal. Commissioner (Appeals) deleted addition on ground that said cash credit was appearing in books of assessee over past four to five years and, thus, it was not fresh credit entry pertaining to relevant assessment year Tribunal dismissed appeal filed by revenue - Whether finding recorded by Commissioner (Appeals) was a finding of fact and, as such, no fault could be found with order of Tribunal in endorsing decision of Commissioner (Appeals) - Held, yes 3. [2012) 349 ITR 260 (Allahabad) CIT vs. Raqhuraii Aqro Industries (P.) Ltd., IT : Where during preceding year assessee was showing two figures, viz., unsecured loan of Rs. 60 lakhs and share application money of Rs. 40 lakhs but during relevant assessment year these were clubbed together and consolidated balance of Rs. 1 crore was shown as unsecured loan, no addition could be made on account of difference between closing balance and opening balance of unsecured loan. Section 68 of the Income-tax Act, 1961 - Cash credits [Loans] - Assessment year 2003-04 - During assessment proceedings Assessing Officer noticed that opening balance of unsecured loans was Rs. 1 crore while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted fact of giving gift, reason for giving gift and their source of income - However, Assessing Officer made addition of whole of gifted amount in assessment year in question - On appeal. Commissioner (Appeals) deleted gifts and loans which were not pertaining to year under consideration and were received by assessee in earlier years - Whether Commissioner (Appeals) correctly deleted addition - Held, yes 7. [2006) 6 SOT 301 (DELHI) Parmod Kumar Dang vs. JCIT Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 1996-97 - Assessee received amounts of Rs. 2,50,000 and Rs. 2 lakhs on 28-9-1995 and 3-10-1995, respectively, by way of cash credit from one R - He also received amount of Rs. 97,886 on 28-9-1995 by way of cash credit from one P -Assessing Officer treated said amounts as unexplained cash credits under section 68 and added same to income of assessee - Account statement of R revealed that there was an opening credit balance of Rs. 4.50.000 which was repaid in cash on 15-4-1995 and 26-4-1995 and same had been received back by assessee in cash on 28-9-1995 and 3-10-1995 - Further account statement of P revealed that there was an opening credit balance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn company is not subject to tax under deeming provision of section 68 of the Act. 10. Furthermore, it was argued that the law of section 68 cannot be applied to remittances made in India by non-resident is strengthened by the proviso to u/s. 68 inserted w.e.f. asst. yr. 2013-14. According to the said proviso, if an assessee company, in which public are not substantially interested, receives money by way of share capital, then the source of funds of resident shareholder has to be established by the assessee in order to get out of the kin of the deeming provision under section 68. Hence, the proviso talks of the source being established only when the shareholder is a resident of India. There is no such requirement if shareholder is a non-resident. Therefore, the creditworthiness of the shareholders as per learned AR, if he is a non-resident, does not have to be established by the assessee in respect of remittance received by him. In this respect Circular No.5 in F.No.73A/2(69)-IT (A-11), dt. 20th Feb,1969 was relied on and which reads as under:- 1. Migrant assessees Money remitted to India through banks-Enquiries by ITOs regarding origin of money-Instructions regarding: It has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... May. 1965); (iv) 1st Oct.. 1965-West Pakistan (vide Ministry of Finance Press Note dt. 3rd Feb.. 1969). (b) He had sufficient resources in the foreign country. (c) He had no source of income either in India or in any foreign country, other than the country from which he migrated, prior to migration, and he was not assessed as 'resident' in India, either for the assessment year preceding the year in which he migrated or for earlier years; and (d) The amount brought in has been duly introduced in the books regularly maintained in India and an intimation of such introduction is given to the (TO within two months of the migrant's arrival. 11. In support of the contention that above addition is not justified, reliance was also placed on the following judicial pronouncements:- 1. (2013) 25 ITR(T) 521 (Delhi - Trib) Russian Technology Centre (P.) Ltd. DCIT IT: If identity of non-resident remitter is established and money has come in through banking channels, it cannot be treated as deemed. Section 68, read with section 69, of the Income-tax Act, 1961 - Cash credit [Share application money] - Assessment years 2002-03, 2003-04, 2005-06 and 2006-07 - Whether moneys remitted by n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould request the hon'ble bench to delete the addition made on this ground. 12. It was also argued that amount transferred through journal entry is not liable to tax under section 68 of the Act. M/s. Syntensia AB (Sweden company) wanted to set-up new business of internet security system with administrative office set-up at Pune Mumbai and hence subsidy company, i.e. assessee company, was formed and incorporated on 30.O7.2007 with Paid up share capital of Rs. 1,00,000/-. Since the assessee company was formed with low paid up capital, the entire long term financial obligation by way of share application were met by its holding company, i.e. M/s, Syntensia AB (Sweden company), on behalf of the assessee company in A.Y. 2008-09 and A.Y. 2009-10. The assessee company and its holding company, i.e. M/s. Syntensia AB (Sweden company) has mutually decided to allot shares against such share application money. And hence, after completion of RBI procedure, the assessee company has issued shares to M/s. Syntensia AB (Sweden company). Under these facts and circumstances of the case, as per learned AR, the amount of share application money [the amount which transferred through journal entry / b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany was incorporated on 30.07.2007. M/s. Syntensisa Asia Pte. Ltd. - Singapore [foreign company] was the holding company of the assessee company and M/s. Syntensisa AB -Sweden [foreign company registered at Sweden] was the ultimate holding company of the assessee company. During the A.Y. 2008-09, the assessee has received further share application money of Rs. 1,46,24,695/- ($366749.52)from M/s. Syntensia AB (Sweden company - Ultimate Holding Company), i.e. share applicant. During the A.Y. 2009-10, the assessee has received share application money of Rs. 56,54,634/- ($137580.19) again from M/s. Syntensia AB (Sweden company), [page 25,30,36 37] and the aggregate amount of Rs. 2,02,79,329/- was brought forwarded till A.Y. 2011-12 as the application for allotment of shares to foreign company was not approved by RBI. From the record we found that the assessee company has submitted following documents before the lower authorities. i. Incorporation Certificate of Share Applicant Company ii. Bank statement iii. Form No.20B for year end on 31.03.2012 iv. Form No. 2 v. Board Resolution passed by assessee company to allot shares 17. During the A.Y. 2012-13, i.e. the assessment year under a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee company has received 2 letters of confirmation in respect of money paid by Syntensia AB (Sweden Company) towards share application for investment in shares of the assessee company i.e. one confirmation of US $ 369249.52 as on 31.03.2008 and another confirmation of US $ 137580.19 as on 03.06.2008, a copy of which are placed on record.US $ 369249.52 as on 31.03.2008 in Indian currency comes Rs 14624695.40 and US $ 137580.19 as on 03.06.2008 in Indian currency comes Rs 5654634.01. Furthermore, the assessee company cannot allot shares to the non-resident without prior permission of RBI. The assessee company has filed an application dated 3rd December 2008 with Yes Bank Limited on 26th December 2008 with enclosure of the required documents and FIRC received by the company and a letter dated 3rd December 2008 to Reserve Bank of India. At para no.5 of the Assessment order the Assessing officer further discussed about the excessive premium charged by the assessee. In this regard we observe that basis of premium was not required till AY 2012-13 and amendment about basis of premium on allotment of shares came thereafter. Moreover the Assessee was a subsidiary of the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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