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2021 (4) TMI 486 - AT - Income TaxAddition on account of share capital and share premium as unexplained cash credit u/s 68 - no replies were received from the said competent authority before the completion of assessment - AO observed that the assessee did not furnish the details of source of funds for OMIL and accordingly concluded that the assessee had not proved the creditworthiness of OMIL to make investment in assessee company - HELD THAT:- We find that the ld CIT-A had deleted the addition made in the year under consideration by placing reliance on the order of his predecessor for Asst Year 2011-12 wherein, on similar facts and circumstances in respect of share capital and premium received from the same party i.e OMIL, the addition made u/s 68 of the Act was deleted. We find that the ld CIT-A had also observed that reference made to CBDT Foreign Tax Division had not brought out any adverse remarks on the bonafides of OMIL and transactions carried out by them with the assessee. We also find that this tribunal in assessee’s own case for the Asst Year 2011-12 [2019 (4) TMI 1422 - ITAT MUMBAI] had deleted the same addition u/s 68 of the Act in respect of share capital and share premium received from OMIL wherein held documentary evidences, arguments of both the sides clearly established that this transaction carried out by assessee receiving share application money party seems to be genuine and explained. AO has not carried out any further inquiry except the fact recorded that there is no authorized share capital to that extent and moreover, AO also noted that there is unjustifiable amount of share premium and hence, entire transactions is not genuine - We have noted that for the purpose of section 68 of the Act, three requirements are required to be fulfilled which is the genuineness of transaction, source of money i.e. creditworthiness of the party and identity of the party. According to us, the assessee has fulfilled all the three ingredients of section 68. Share premium can only be added under section 56(2)(vii)(b) which was inserted by the Finance Act, 2013 with effect from 01.04.2013 i.e. for and from the AY 2013-14 - w.e.f A. Y. 2013-14 for closely held companies share premium or share capital is deemed to be normal income if shares are issued exceeding fair market value of shares. But, in any case the amendment will apply for and from AY 2013-14 and not to earlier Assessment Year because the amendment is prospective and not retrospective. Hence, on the issue of share premium, the provisions of section 56(2) (viib) cannot be applied for making addition even under section 68. Assessee has discharged its onus by adequately disclosing the transaction in its books of accounts, filing statutory forms as regards allotment of shares, providing name, address and PAN of the shareholders, etc. the assessee has sufficiently discharged the onus cast upon it for the purpose of section 68 and no addition can be made on this account. CIT(A) has rightly deleted the addition and we confirm the same. These two common issues of Revenue’s appeal are dismissed. Disallowance on account of depreciation on intangible assets - AO observed that the assessee had shown addition of intangible assets as ‘rights in infrastructure’ and claimed depreciation thereon during the year under consideration - AO had denied depreciation on the only ground that the assessee had self-contradicted its claim by saying that such rights were intangible assets on one hand and by claiming depreciation at the rate applicable to factory building on the other hand - HELD THAT:- We find that the ld CIT-A had granted relief to the assessee by categorically holding that the rights in infrastructure acquired by the assessee in VITP is having direct nexus with effective utilization of its factory premises in its Textile Park. This factual finding has not been controverted by the revenue before us . Either way, the incurrence of expenditure towards acquiring rights in infrastructure in VITP has not been doubted by the revenue. The only issue is the rate of depreciation thereon. The ld CITA had also observed that the assessee is eligible for 25% depreciation but had claimed only 10% and accordingly deleted the disallowance made by the ld AO. Hence we do not deem it fit to interfere in the order of the ld CITA. Accordingly, the Ground No. II raised by the revenue is dismissed. Addition u/s 56(2)(viia) - assessee had acquired shares of VITPL at a price less than fair market value of such shares - assessee became member in Vraj Integrated Textile Park Ltd (VITPL) formed on the basis of Scheme of Integrated Textile Park (SITP) of Ministry of Textiles, Government of India - HELD THAT:- We find that the ld CIT- A by placing reliance on the decision of his predecessor in assessee’s own case for the Asst Year 2011-12 [2019 (4) TMI 1422 - ITAT MUMBAI] on the similar set of facts , deleted the addition made u/s 56(2)(viia) of the Act as held entire reserves and surplus appearing in the balance sheet as on 1.4.2010 are only on account of the grant received from the Government of India and not on the basis of any business profit earned by the company - there can be no inference that the shares of VITPL have been acquired by the assessee at a price which is less than its fair market value. Hence, we find no reason to reverse the findings of CIT(A) and accordingly, the same is upheld. - Decided against revenue.
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