TMI Blog2014 (11) TMI 479X X X X Extracts X X X X X X X X Extracts X X X X ..... been brought in the Income Tax Act under the head "Income from other sources" by inserting Clause (viib) to Sec. 56 of the Act wherein it has been provided that any consideration for issue of shares, that exceeds the fair value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be treated as the income of the assessee but the legislature in its wisdom has made this provision applicable w.e.f 1.4.2013 i.e. on and from A.Y. 2013-14 - the transaction has to be considered in the light of the provisions of Sec. 68 of the Act - the assessee has given details of names and addresses of the shareholders, their PAN Nos, the bank details and the confirmatory letters - the initial burden of proof as rested upon the assessee has been successfully discharged by the assessee - Even if it is held that excess premium has been charged, it does not become income as it is a capital receipt - The receipt is not in the revenue field - if the identity is proved, no addition can be made u/s. 68 of the Act – the order of the CIT(A) is upheld – Decided against revenue. Restriction of disallowance u/s 14A r.w. section 8D – Held that:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008 declaring loss at ₹ 1,24,191/-. The return was processed u/s. 143(1) of the Act and thereafter it was selected for scrutiny assessment and statutory notices were issued and served upon the assessee. 4.1. During the course of the scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has shown income from dividend only. The AO further noticed that the issued, subscribed and paid up capital of the assessee was increased from 2,50,000/- to ₹ 83,75,000/-. It was noticed that the assessee has collected share premium at ₹ 6,69,75,000/-. The AO further observed that the entire increase in the share capital was invested in shares of M/s. Omni Infrastructure Pvt. Ltd. The assessee was asked to furnish the details with supporting evidences of the subscribers to the share capital and also the premium received. The assessee was also asked to justify the charging of premium of ₹ 190/- per share. The assessee furnished list of shareholders, their share holding pattern as on first and last day of the balance sheet, copies of share certificates issued, copy of share application form, Form No. 2 filed with Registrar of Companies. As regards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gagandeep Infrastructure P. Ltd. 3,50,00,000 Money Matters Infrastructures P. Ltd. 1,70,00,000 Parshwanath Buildcon P. Ltd. 3,30,00,000 4. (*) Money Matters Properties Pvt. Ltd. 2,00,00,000 8,91,00,000 Gagandeep Infrastructure P. Ltd. 2,30,00,000 Rolesoft Mercantile Pvt. Ltd. 30,00,000 Money Matters Infrastructures P. Ltd. 2,25,00,000 Meghraj Properties P. Ltd. 25,00,000 Parshwanath Buildcon P. Ltd. 1,20,00,000 5 (*) Sitillite Properties Pvt. Ltd. 1,83,50,000 2,82,50,000 Rolesoft Mercantitle Pvt. Ltd. 10,00,000 Gagandeep Infrastructure P. Ltd. 20,00,000 Meghraj Properties Ltd. 25,00,000 Money Matters Infrastructure P. Ltd. 1,95,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be charged on allotment on the fresh shares. The AO finally concluded as : No documentary evidence has been filed to justify the basis on which future high growth prospects and high profitability have been assumed. No weightage has been given nor any reason assigned for non consideration of past performance of the company for the valuation purposes. As already discussed the company does not possess any patent, copy right, intellectual property rights etc, which could be considered as hidden assets which could have enhanced the value of the shares of the company and therefore justified to some extent the charging of very high premium for allotment of shares. The only investment in shares of another company which is also new and with no track record or asset base. Hence the claim of assessee that, the company has future potential is totally disproved having regard to several incumbencies attached to its business as on date of call of share premium and is a subject matter of volatility and no valuation what so ever can been given to the subscriber to justify the premium on this basis. The companies which have invested in assessee s alleged share capital are all group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of Sec. 68 of the Act. 6. After considering the facts and the submissions, the Ld. CIT(A) observed that the AO has not given any reason as to why the investment with a premium is not genuine when the assessee has produced all the details of investors in the form of share application form, bank account details, copies of the return of income alongwith balance sheet. The Ld. CIT(A) further observed that charging of premium is outlook of the investors. If an investor finds that the payment of premium is justified then only he would look to invest otherwise he may not invest in the shares of newly promoted company. The Ld. CIT(A) was of the belief that the department cannot question the charging of premium by the company. The Ld. CIT(A) further observed that the genuineness and the credit worthiness of the investors could have been examined by the AO which he has not made. Drawing support from the decision of the Hon ble Supreme Court in the case of Loevely Exports Pvt. Ltd. 216 CTR 195, the Ld. CIT(A) deleted the addition holding that the AO has not justified in adding the increase in share capital alongwith share premium as unexplained cash credit u/s. 68 of the Act. 7. In s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that it is a prerogative of the Board of Directors of the company to decide the premium amount and it is the wisdom of the share holders whether they want to subscribe to such a heavy premium. The Revenue authorities cannot question the charging of such huge premium without any bar from any legislated law of the land. The amendment has been brought in the Income Tax Act under the head Income from other sources by inserting Clause (viib) to Sec. 56 of the Act wherein it has been provided that any consideration for issue of shares, that exceeds the fair value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be treated as the income of the assessee but the legislature in its wisdom has made this provision applicable w.e.f 1.4.2013 i.e. on and from A.Y. 2013-14. In so far as the year under consideration is concerned, the transaction has to be considered in the light of the provisions of Sec. 68 of the Act. There is no dispute that the assessee has given details of names and addresses of the share holders, their PAN Nos, the bank details and the confirmatory letters. 11.1. Considering all these undisputed fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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