Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (6) TMI 327 - AT - Income TaxIssues involved: The judgment involves the interpretation of provisions u/s 2(22)(b) r.w.s. 56(2)(viia) of the Income Tax Act regarding the taxation treatment of bonus shares received without consideration. Assessment Proceedings: The Revenue appealed against the deletion of an addition made towards bonus shares received without consideration, treated as "Income from other sources" u/s 56(2)(viia). The case was reopened as the assessee held shares of a group entity and received bonus shares. The Assessing Officer (AO) considered bonus shares as dividend, citing provisions of Sec. 2(22)(b) and Sec. 56(2). The AO held the amount taxable as dividend based on fair market value of shares. The AO's decision was based on the belief that bonus shares constituted dividend income. Appellate Proceedings: The Commissioner of Income Tax (Appeals) observed that bonus shares to equity shareholders did not fall under the definition of dividend u/s 2(22)(b). Citing legal precedents, it was held that bonus shares do not represent distribution of accumulated profits. The CIT(A) directed deletion of the addition. The CIT(A) relied on decisions stating that bonus shares do not amount to payment of dividend and do not involve release of profits to shareholders. The issue of bonus shares was deemed not taxable under Sec. 56(2). Findings and Adjudication: The Tribunal agreed with the CIT(A) that bonus shares to equity shareholders do not constitute dividend under Sec. 2(22)(b). Legal precedents were cited to support this view, emphasizing that bonus shares do not result in any change to the capital structure or profit-making apparatus of the company. The Tribunal dismissed the appeal, upholding the decision that bonus shares received without consideration were not taxable under Sec. 56(2)(viia). Conclusion: The Tribunal affirmed that bonus shares issued to equity shareholders do not amount to dividend income under the Income Tax Act, and therefore, the addition made by the AO was not sustainable. The judgment highlighted the distinction between bonus shares and dividend income, ultimately leading to the dismissal of the Revenue's appeal.
|