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2018 (7) TMI 2342 - AT - Income TaxAddition u/s. 68 - unexplained cash credit of share allotment to foreign company - as argued by AR that Cash Credit on account of Share Application money received from non-resident company is not subject to deemed addition u/s. 68 - HELD THAT:- The law is section 68 is not apply 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 u/s 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, if he is a non-resident, does not have to be established 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.
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