TMI Blog2015 (10) TMI 2042X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, 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 share premium as income during the assessment year 2010-11 under consideration. Thus, CIT was not correct in invoking amended provisions during the year under consideration. AO has called for financial details of the companies and also examined the parties in order to satisfy himself about the genuineness of the transaction and source of money. Thus, after examining the evidences available on record, the AO has accepted the claim of assessee regarding receipt of share capital at premium. 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 Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs in the form of bonus shares. The relevant provisions of Company s Act applicable to share premium are u/s.78 of Company s Act. What can be distributed to share holders of assessee are only profits or accumulated profits. Therefore, primary nature of premium receipt is revenue and therefore 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 that both the conditions, that is, the order being erroneous as well as prejudicial to the interest of Revenue, are cumulative. Even if an order is prejudicial to the interest of the revenue, no revision is possible if it is not erroneous. The provision cannot be invoked to correct each and every type of mistake. He further submitted that no revision if ITO adopts follows one of the possible me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 was of Mr. Dilip Dalal, and he having already infused ₹ 55 lacs, it was mutually agreed that the Elder Group, through its associate concerns, would pump in the requisite finance of around ₹ 3 crores to take the activities of the company at higher level, without diluting the controlling interest of Mr. Dalal over the company. Towards this, it was mutually decided, keeping in mind the future prospects and based on valuation, that 1,24,000 shares would be issued to them at premium of ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties below. We had also deliberated on the judicial pronouncements cited at bar by the ld. AR and DR in the context of factual matrix of the case. From the record, we found that the CIT has invoked his powers u/s.263 on the plea that the nature of the premium received on share capital was revenue in nature, therefore, chargeable to tax. The CIT also observed that provisions of Section 78 were applicable 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 adverse view has been taken about the enquiries already made by the AO. Further the CIT had categorically accepted and acknowledged that the AO had made verification/inquiries regarding the source of the cash credit. From the record, we also found that the AO has made direct enquiry with two sharehol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness 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 from legitimate sources. 9. In the case of Gagandeep Infrastructure Pvt. Ltd., ITA No.5784/Mum/2011, order dated 23-4-2014, the Mumbai Tribunal held that issue of shares at premium is always a commercial decision which does not require any justification. Further the premium is a capital receipt which has to be dealt with in accordance with section 78 of the Companies Act, 1956. 10. After going though the material placed on record, we found that the AO has called for financial details of the companies and also examined the parties in order to satisfy himself about the genuineness of the transaction and source of money. Thus, after examining the evidences available on record, the AO has accepted the claim of assessee regarding receipt of share capital at premium. The Commissioner has not found any fault with the details and records that the AO has not conducted the proper enquir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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