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2017 (3) TMI 385 - ITAT AHMEDABAD

2017 (3) TMI 385 - ITAT AHMEDABAD - TMI - Amount received on account of forfeiture of share application money by way of issue of share warrants - capital receipts OR revenue receipt - Held that:- Commissioner of Income Tax(A) has allowed assessee’s appeal in a right perspective by treating the amount of ₹ 94.80 lacs received as share application money for issuing of share warrants as capital receipt and not revenue receipt as it was not earned from regular business activities carried on by .....

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Year 2010-11 is directed against the order of ld. Commissioner of Income Tax(A)-VIII, Ahmedabad, dated 30.01.2014 vide appeal no.CIT(A)- VIII/42/AC(OSD)-1 R-4/12-13 arising out of order u/s 143(3) of the Income-tax Act, 1961 (in short the Act) framed on 20/06/2012 by ACIT(OSD)-1, Circle -4, Ahmedabad. Revenue has raised following grounds : 1. The Ld.CIT(A) has erred in law and on facts in deleting the addition of ₹ 94,80,000/- from the total income treating it as capital receipt instead of .....

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of rubber and textile products. Income-tax return declaring total income at ₹ 3,92,98,770/- was filed on 29.09.2010. Case was selected for scrutiny assessment and notice u/s 143(2) of the Act dated 25.8.2011 followed by notice u/s 142(1) of the Act were issued and duly served on the assessee. Necessary information were called for and submitted. During the course of assessment proceedings ld. Assessing Officer observed that assessee filed a letter dated 6.5.2012 requesting to exclude a sum .....

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ount of ₹ 94.80 lacs as revenue receipt by observing as follows :- 4,1 The submission of the assessee has been considered carefully. The contention of the assessee is not acceptable. The application money received by the assessee by way of issue of share warrants has been received during the normal course of business of the assessee and is the business income. The said amount is not a capital receipt as contended by the assessee since the same has been received during the course of busines .....

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assessee to treat the above receipts as capital receipts is hereby rejected. 3. Aggrieved, assessee went in appeal before ld. Commissioner of Income Tax(A) and succeeded in full as ld. Commissioner of Income Tax(A) following the decision of the Co-ordinate Bench, Ahmedabad in the case of DCIT (OSD), Ahmedabad vs. Brijlaxmi Leasing and Finance Ltd. 118 ITD 546(Ahd) allowed assessee s ground by accepting ₹ 94.80 lacs as capital receipt by observing as follows :- 2.3 Decision: I have carefull .....

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subsequently, during the course of assessment proceedings, the appellant claim that it was a capital receipt and should not be considered as part of the total income earned from the business activity. The AO did not accept the claim of the appellant regarding treatment of forfeiture of share application money as capital receipt. During the course of appellate proceedings the appellant has submitted that share application money which was forfeited is clearly in the nature of capital receipt and .....

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s. The amount received was credited to shareholders fund in the balance sheet. These applicants made part payment in pursuance to the share application. The issue of shares warrants was duly approved by Bombay Stock Exchange, as the appellant company a listed company on BSE. However, later on the share applicants did not make further payments and after informing the share applicant's and giving them the opportunity the appellant forfeited the amount of 10% of the share warrant paid by the ap .....

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tal receipt and exclude the same from the income. 3. In the result, the appeal is allowed. 4. Aggrieved, Revenue is now in appeal before the Tribunal. Ld. Departmental Representative vehemently argued supporting the order of Assessing Officer and submitted that assessee in its return of income has treated the amount of ₹ 94.80 lacs as revenue receipt and it was an after-thought action of the assessee to claim it to be a capital receipt and ld. Assessing Officer, therefore, rightly treated .....

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rtmental Representative and gone through the records placed before us as well as the decision of the Co-ordinate Bench, Ahmedabad in the case of DCIT(OSD) vs. Brijlaxmi Leasing & Finance Ltd.(supra). Solitary grievance of the Revenue through this appeal is against the order of ld. Commissioner of Income Tax(A) deleting the addition of ₹ 94.80 lacs by treating the amount received on account of forfeiture of share application money by way of issue of share warrants as capital receipts as .....

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d. As the shares were to be allotted before 24.2.2009 but the share warrant applicants failed to give the balance amount, the warrant application money had been forfeited during the relevant year. 6.1 We further observe that similar issue dealing with similar facts relating to forfeiture of share application money to be treated as capital receipt or revenue receipt came up before the Co-ordinate Bench, Ahmedabad in the case of DCIT(OSD) vs. Brijlaxmi Leasing & Finance Ltd. (supra) and Revenu .....

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dispute. The short question which fall for our consideration is whether the above forfeiture amount is taxable under the provisions of Income-tax Act, 1961 or not. The learned DR vehemently placed reliance on the decision of the Hon'ble Supreme Court in the case of T.V. Sundaram Iyengar & Sons Ltd. (supra) for his contention that forfeited amount is taxable as revenue receipt. However, we find that the facts of the case that were before the Hon'ble Supreme Court are distinguishable .....

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adistinction to that it has credited the same in capital reserve account. In the above facts, in our cons idered 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 .....

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