9911796707
TMI Blog2012 (4) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... d advances to the Industrial units and Equipment lease rentals, application processing fees and sale of investments and dividend earned etc. During the year 1995-96, the Corporation received a sum of Rs. 2,29,76,000/- from 1160 partly paid shareholders against its public issue and there were calls in arrear amounting to Rs. 1,73,64,000/-. The Board of Directors of the Corporation in its meeting held on 3.8.2001 forfeited partly paid shares amounting to Rs. 2,25,87,000/- of the 1158 shareholders. Against the above forfeiture, the calls in arrear amounting to Rs. 1,70,79,000/- has been adjusted. The amount of the shares forfeited has been shown as Reserves and Surplus in Schedule B of the Balance Sheet. On account of stay granted by the court, the shares of two shareholders could not be forfeited during FY 2001-02 and the balance calls-in-arrear of Rs. 2,85,000/- have been shown in Schedule A. After vacation of stay orders, the shares of these two shareholders have also been forfeited during the year 2002-03. For the assessment year 2002-03, the assessee filed its original return of income on 31.10.2002 declaring loss of Rs. 7,56,21,182/-. The Assessing Officer completed the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;liabilities' in the balance sheet. The case, therefore, be reopened within the meaning of section 147 of the Income Tax Act, 1961. " 4. In response to notice u/s 148 of the Act, the assessee furnished the return of income on 22.4.2009 declaring the same figure of net loss as per the statutory audit report as was declared in the original return of income. A letter was also filed on behalf of the assessee 28.4.2009 seeking reasons to believe for reassessment and also seeking certain other information. Thereafter, vide letter dated 4.12.2009, the assessee was supplied with a copy of reasons for the issue of notice u/s 148 and was asked to show cause as to why the amount of Rs. 2,25,87,000/- received on account of forfeiture of shares may not be assessed as its income for the assessment year under consideration. The assessee vide its reply dated 21.12.2009 submitted that the amount received on account of forfeiture of shares is a capital receipt and not a Revenue receipt and, therefore, not liable to tax. The Assessing Officer did not accept the claim of the assessee holding that the amount received on account of forfeiture of shares is a Revenue receipt and assessee's income wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee rather it is a capital receipt. In support of the forfeited share being a capital receipt and not taxable the following case laws are cited: i) Asiatic Oxygen L td Vs. DCIT (1994) 49 ITD(Cal) 355 ITAT Calcutta E Bench ii) DCIT Vs. Brijlaxmi Leasing & Finance Ltd (2009) 118 ITD 546 iii) Prism Cement Limited Vs. JCIT (2006) 101 ITD 103 (Mumbai) ITAT (Mumbai 'I' Bench iv) Addl. CIT Vs. Om Oils A Oil Seeds Exchange Ltd (1985) 152 ITR 552 (DEL) v) Travancore Rubber & Tea Co. L td Vs. CIT(2000) 243 ITR 158(SC) 2.5 That the contention of the learned AO that the part amount received from the original buyers and now forfeited is to be reduced from the cost of shares is totally wrong whereas it will be shown only when they are offered to future subscribers and till then it will be shown as liability of the assessee which have been correctly shown in the Balance Sheet. 2.6 That further the contention of the learned A O that the forfeiture of share money is an income in the hands of the assessee is also wrong and has not been explained as to how it is an income of the assessee and which provision/Section of the Income Tax Act, 1961 it is covered. The fact is that forfeiture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is always shown in the liabilities side of the balance sheet being part of share capital. Admittedly, the assessee is not in the business of raising finance through offer of equity. The forfeiture of share money is not the income of the assessee rather it is a capital receipt. In our view, there is no law or Rule to show part amount received from the original buyer and now forfeited to be reduced from the cost of shares at which they are to be offered to future subscribers. No entry can be passed on presumptive basis. Even the accounts are never prepared on presumptive basis. Rather they are prepared on actual basis and presented as per law for the time being in force to show true and fair view of the state of affairs of the assessee. In our view, the assessee has correctly shown the amount on liability side of the balance sheet under the head 'Reserve and Surplus'. Thus, the amount received by the assessee on account of forfeiture of shares is to be held as capital receipt in view of the decisions mentioned in the written submissions of the assessee submitted before the CIT(A). In the case of DCIT Vs Brijlaxmi Leasing & Finance Ltd (2009) 118 ITD 546 (Ahd.), the assessee company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to that it has credited the same in capital reserve account. In the above facts, in our considered opinion the decision of the Tribunal in the case of Prism Cement Ltd. (supra) is more applicable which was rendered by the Tribunal after duly considering the aforesaid decision of the Hon'ble Supreme Court in the case of T.V. Sundaram Iyengar & Sons Ltd. (supra). The Tribunal in the said case has held as under : "15. Thus, the earnest money or an advance amount received on account of issuance of NCDs, if forfeited on account of non-payment of call money, the loan liability would only convert into a capital receipt. It would not assume a character of revenue receipt or business receipt because NCDs were not issued in the course of regular business of the assessee as evident from the facts of the case. Assessee's main business is of cement and it was in the process of set up of cement manufacturing plant at Satna during the impugned assessment year. In these circumstances, we are constrained to hold that the amount received by the assessee in lieu of issuance of NCDs which were forfeited later, on account of non-payment of call money assumes a character of capital receipt which ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Supreme Court in the case of Travoncore Rubber and Tea Co. Ltd v CIT (supra), we do not see any infirmity in the order of the CIT(A). Accordingly, we uphold the order of CIT(A) on this issue and dismiss the ground No.1 of the appeal. 13. Ground No.2 of the appeal reads as under:- 2. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in holding that the issue of notice u/s 148 is barred by time limit despite the fact that the Assessing Officer has issued notice within the time limit. 14. In appeal before the CIT(A), the assessee took the ground stating that notice u/s 148 was issued after expiry of four years form the end of the assessment year as the original assessment was framed u/s 143(3) of the Act on 31.12.2004, and hence the notice u/s 148 was bad in law. The plea taken by the assessee was that since original assessment was completed u/s 143(3) of the Act, notice u/s 148 could have been issued within four years from the end of the relevant assessment year i.e. 31.3.2007. The notice u/s 148 was issued on 25.3.2009 after nearly two years of the time barring date from the end of the relevant assessment year. The contention of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
