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2015 (10) TMI 2042 - ITAT MUMBAI

2015 (10) TMI 2042 - ITAT MUMBAI - TMI - Revision u/s 263 - as per CIT(A) nature of the premium received on share capital was revenue in nature, therefore, chargeable to tax - provisions of Section 78 were applicable to the share premium - whether since the nature of receipt has not been explained, the premium amount credited in the books of account is chargeable to tax u/s.68 of the Act? - Held that:- It is the wisdom of person applying for share to determine whether to buy the shares at a prem .....

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per the documentary evidence placed on record. So far as nature of receipt on account of share capital and premium thereon is concerned, both are in the nature of capital receipt and not in the nature of income. The CIT has tried to invoke section 68 to see that share premium is income of the assessee with respect to amendment brought by the Finance Act, 2012. However, the amendment in Section 68 was brought by the Finance Act, 2012 w.e.f1-4-2013, therefore, there is no reason to treat the shar .....

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The Commissioner has not found any fault with the details and records that the AO has not conducted the proper enquiry. When the entire record was available with the Commissioner, he ought to have given a concluding finding that the view taken by the AO is contrary to the law as well as facts emerging from the records. However, the Commissioner has not given any such finding and restore the matter to the record of the AO which is not permissible as per provisions of Section 263 when the AO has c .....

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the case of such share applicants.

Thus we can conclude that share capital received by the assessee at premium was genuine, not only source of the fund but also genuineness of the transaction was duly established. The share premium so received was capital receipt not liable to tax during the year under consideration. Necessary enquiries with regard to share capital so received was made by the AO. Accordingly, there is no merit in the order passed by the CIT u/s.263 of the I.T.Act. - D .....

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re that the assessee is engaged in the business of financing. During the year under consideration assessee received share application money along with the premium. The case of the assessee was selected for scrutiny and scrutiny assessment order was passed u/s.143(3) of the Act on 4th March, 2013. The CIT(A) invoked his power under Section 263 on the following plea :- (i) The share premium amount received by assessee, while increasing the assets in balance-sheet in the form of cash/bank balance d .....

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erefore chargeable to tax. (ii) In the alternative, since the nature of receipt has not been explained, the premium amount credited in the books of account is chargeable to tax u/s.68 of the Act. On the above plea, the CIT(A), held that the order of assessment is erroneous and prejudicial to the interest of revenue. The assessment order was set aside with the direction to the AO to frame the assessment afresh taking into account the observations made in this order. 3. It was argued by the ld. AR .....

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thod could fetch some more revenue or the Commissioner is not in agreement with the method adopted by the AO would not render the assessment order erroneous and prejudicial to the interest of revenue. Reliance was placed on the decision of Hon ble Supreme Court in the case of Simon Carves Ltd., 105 ITR 212, Malabar Industrial Co. Ltd., 243 ITR 83, Max India Ltd., 295 ITR 282. Reliance was also placed on the decision of Hon ble jurisdictional High Court in the case of Design and Automation Engine .....

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is of listed companies, consultancy services etc. He is providing consultancy services to many reputed brokers, like Sherkhan, Rosy Blue Securities, etc., on various segments as mentioned above. He has devoted his entire time to this industry and has got the foresight of the market conditions. Having worked with many known brokers and advising them, he has an overall knowledge of market which entails his clients to make very good returns on their investments, which has created his goodwill in th .....

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se his vast experience and knowledge. For this purpose, he was looking out for an already existing company which can be taken over by him, so as to save time and cost in forming a new company. As Mr. Dilip Dalal has a good reputation as a financial consultant vizard, Elder Group, having Elder Pharmaceuticals Limited, a public limited company, as its flagship company, showed keen interest in associating with Mr. Dilip Dalal to reap the benefits of his expertise. As the entire intellectual capital .....

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#8377; 240/- per share. This was done in two phases during the year. 4. With regard to CIT s allegation regarding not complying with the provisions of Section 78, ld. AR contended that the assessee - company has not passed the benefit of the premium, directly or indirectly, to any shareholder or any outsider and has used the share premium wholly and exclusively for the purpose of its business. All investments are in blue chip/A group well known listed companies. There is no investment in any pri .....

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asions. This has been accepted by the Registrar of Companies and no objection of whatsoever nature has been taken by them so far. Similarly, the assessee being a company, its accounts are audited under the Companies Act and the Statutory Auditor has certified its accounts - which include the aspect of share premium - as depicting true and fair status of affairs. 5. With regard to CIT s allegation regarding no enquiry by the AO, ld. AR contended that during the assessment proceeding, the A.O. mad .....

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ect. 6. On the other hand, ld. AR contended that the AO has not made full enquiry with regard to the nature of share premium received by it. He further relied on the decision of Hon ble Kerala High Court in the case of P.V.Sreenijin & Anr. V. CIT & Ors., 106 DTR 0087, Hon ble Bombay High Court in the case of Hindustan Lever Ltd., ITA No.5818/2010, wherein it was observed that where the order was passed by the AO without application of mind, the same is liable to be set aside by the CIT u .....

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licable to the share premium. After going through the order of the CIT, we found that he has not disputed the enquiry made by the AO with regard to issue of shares at premium including sources thereof. It is also not the case of the CIT that there was any incriminating material on record, stated any adverse view in this regard nor there is any whisper in this regard. With regard to the share capital receipt, the CIT also not doubted that assessee is involved in any accommodation entries even no .....

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companies. Assessee has duly filed confirmation from the share applicants including balance sheet, bank statement, etc. The CIT stated that the AO has not made any enquiry about the nature of receipt in temrs of Section 68. We found that the nature of cash credit was self evidence, being the amount received on account of issue of shares at premium. In support of the shares having been issued at premium assessee had filed duly audited accounts, certified by the statutory auditor before the AO. Ev .....

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ties under the Companies Act, 1956 by filing requisite Form No.2 along with Annexures. The Registrar of companies has accepted the issue of shares at premium and no adverse view has been adopted in this regard. Thus, the nature of cash credit was also evident as per the documentary evidence placed on record. So far as nature of receipt on account of share capital and premium thereon is concerned, both are in the nature of capital receipt and not in the nature of income. The CIT has tried to invo .....

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vt. Ltd., ITA No.467 of 2014, order dated 16-4-2015, held that onus casts upon the assessee u/s.68 of the Act is to satisfy the department about the true identity of an investor, its creditworthiness and genuineness of a transaction. The Hon ble High Court further observed that whether the assessee company charged a higher premium or not, should not have been the subject matter of the enquiry in the first instance. Instead, the issue was whether the amount invested by the share applicants were f .....

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