TMI Blog2017 (5) TMI 964X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 2010-2011, is directed against the order passed by the ld. Commissioner of Income Tax (Appeals)-VIII, Kolkata, in Appeal No.145/CIT(A)-VIII/Kol/13-14, dated 27.02.2014, which in turn arises out of an order passed by the AO u/s.143(3) of the Income Tax Act 1961, (hereinafter referred to as the Act ), dated 28.03.2013. 2. Brief facts of the case qua the assessee are that the assessee filed its return of income declaring Nil income on dated 14.10.2010, for A.Y.2010-11. The case of the assessee was selected for scrutiny through CASS and the AO framed assessment u/s.143(3) treating the forfeited amount of ₹ 12,40,00,000/- as revenue income in respect of 75000 warrants. The assesse under consideration had forfeited 75000 warrant amounting to ₹ 12,40,00,000/- allotted to promoters and other investors and transferred the said amount to the capital reserve. During the assessment proceedings the assesse submitted before the Assessing Officer that said amount is capital receipt and as such should not be treated as revenue receipt. But Assessing officer has ignored the submissions of the assesse and treated the said receipt as revenue in nature. 3. Not being satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law, the Ld.CIT(A)-VIII, Kolkata erred in not allowing the addition made on forfeiture of share warrant amounting to ₹ 12.40 crores to be added in Book Profit assessable u/s.115JB of the IT Act, 1961 which falls automatically in line with the addition. 7. The appellant craves leave to add, alter or abrogate any ground of appeal at the time of hearing. 5. However, in this appeal the Revenue has raised a multiple grounds of appeal but at the time of hearing the solitary grievance of the Revenue has been confined to ground No.3 which relates to the issue whether forfeiture of share warrants is capital receipt in nature or Revenue in nature. Other grounds raised by the Revenue are supportive/consequential/premature grounds. 5.1 None appeared on behalf of the Revenue. 5.2. Ld. AR for the assessee has submitted before us that the ld. AO has concluded wrongly, that the amount of ₹ 12.40 crores transferred by the assessee to the Capital Reserve and representing amount of share warrant forfeiture is a revenue receipt and should be taxed under section 28(iv) of the Act. The Ld. AR further submitted that this conclusion of the AO is without appreciation of the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration for these shares warrants. In both these years, the assessee had disclosed these as part of the shareholders fund under the heading share warrant on the face of the balance sheet and had made adequate disclosures for the same in the notes to account. During the financial year 2009-10 relevant to the AY 2010-11, subscribers to the share warrants did not make any further payments. Keeping in line with the terms of the issue and the existing regulations, the share warrants lapsed and consequently the assessee forfeited the amount received at the time of issue of the warrants. The forfeited amount was shown as part of shareholders fund under the heading Capital Reserve and had made adequate disclosures for the same in the Notes to Account. As per the AO since the subscribers of the warrants have treated the said forfeiture as a Short Term Capital Loss, and the assessee has treated the said forfeiture as a Capital Reserve, there is no tax payout in either hand. This reasoning is devoid of any legal basis and can never form the basis of completing an assessment. In addition to this, ld. AR for the assessee has relied on the following judgments :- (i).Hoshiarpur Electric S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at income includes any capital gains chargeable under section 45. Thus it is clear that a capital receipt simplicitor cannot be taken as income. This clearly implies that a capital receipt in principle is outside the scope of income chargeable to tax and a receipt cannot be taxed as income unless it is in the nature of revenue receipt or is bought within the ambit of income by way of a specific provision in the Act. No matter how wide be the scope of income under section 2(24), it cannot obliterate the distinction between capital receipt and revenue receipt . It is now well settled that in order to find out whether it is a capital receipt or revenue receipt one has to see what it is in the hands of the receiver and not what it is in the hands of the payer. The consideration for which the amount has been paid by the developers is, therefore, not really relevant in determining the nature of receipt in the hands of the assessee As held by Hon'ble Supreme Court, in the case of Dr. K George Thomas v. CIT [1985] 156 ITR 412/23 Taxmann 46, the burden is on the revenue to establish that the receipt is of revenue nature though once the receipt is found to be of revenue character, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition on account of forfeiture of security deposit was to be deleted .... Based on the above judicial pronouncements, it is clear that a capital receipt cannot be considered as income and no charging provision can be invoked to tax such a receipt. In the given case, the write back is of a capital liability and is akin to a capital receipt. In the given case, it is clear that the Appellant has received the amounts on allotment of share warrants and the same is related to the capital structure of the Appellant and is definitely a part of the Fixed Capital of the Appellant. 5.3. Having heard the submissions of ld AR for the assessee and perused the material available on records, we are of the view that there is merit in the submissions of the assesse, as the propositions canvassed by the ld AR for the assesse are supported by the judgments cited by him (supra). As ld AR for the assessee as pointed out that the money forfeited was received for the capital of the company. In the instant case, the share warrant money was forfeited as per the terms of the issue. This fact is not in dispute. It is settled position of law that by charging provisions of section 4 and 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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