TMI Blog2018 (7) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee’s shares are not quoted, the AO would examine whether, the valuation of shares done by the assessee is in accordance with the law/rule and proceed to determine the correct value of share and income after affording adequate opportunity to the assessee. The assessee shall place all the materials in its support before the AO and comply to the AO’s requirements as per law. - Decided in favour of assessee for statistical purposes. - I.T.A. No: 368/Chny/2018 - - - Dated:- 28-6-2018 - SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER For The Assessee : Shri. N.V. Balaji, Advocate For The Revenue : Shri. VijaykumarPunna, Jr. St. Counsel ORDER PER S. JAYARAMAN, ACCOUNTANT MEMBER: The assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-15 , Chennai, in ITA No.63 (old) 30.11.2017/2014-15/ 673(new)/CIT(A)15/2016-17 dated for the AY 2008-09. 2. M/s S4 Carlisle Publishing Services P Ltd, the assessee, formally called as S-4 IND Software PvtLtd, is a company engaged in E -publishing and software enabled services since 08.08.2000. In the assessment made u/ 143(3) r.w.s. 147 on 31.3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e premium received : 2,31,580 x 47 = Rs, 1,08,84,260 Total share capital introduced during AY 07-08 Rs,1,32,64,214 Total Share Premium introduced during AY 07-08 Rs.L08,84,260 Rs.2,41,48,474 Subsequently, during the A. Y. 2008-09, the assessee had floated a wholly owned US subsidiary by name S4 Carlisle Publishing Services Inc. The assessee company has entered into a share transfer and purchase agreement on 06-04-2007 with M/s. Carlisle Communication Inc, US.A. Corporation incorporated under the laws of IOWA whereby the shareholders of Carlisle Communication Inc., agreed to sell the shares held by them to S4 Carlisle Publishing Services inc, a wholly owned foreign subsidiary of the assessee company, for a total purchase price of USD $3.5 million and in return to invest a sum of USD $ 2.5 million in the assessee company so as to hold 25% of the outstanding capital of the assessee company as on 31.03.2008.By this, the share capital and share premium has changed as under: No. of shares issued @ ₹ 10 is 5,77,194 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition made u/s 68 was held to be validetc, the Ld. CIT(A) held that the assessee has failed to satisfactorily explain the genuineness of receipt towards share premium received. The AO has clearly brought out the facts and circumstances which prove that the assessee company has received share premium at exorbitant value , much more than the valuation done by the assessee s C.A, for which it has no convincing explanation. The assessee has received substantial foreign remittance through a dubious transaction. Therefore, the Ld CIT(A) held that the AO s addition of ₹ 10.15 crore made u/s. 68 is upheld and the assessee s grounds are dismissed. 4. Aggrieved, the assessee filed this appeal with the following grounds : 1) The orders of the assessing officer and that of the Commissioner of Income Tax (Appeals) CIT(A)9 are against the law, the facts and circumstances of the case and the principles of equity and natural justice. 2) The CIT(A) erred in upholding the addition of ₹ 10.15 crores under section 68 of the Income Tax Act. 3) The CIT(A) failed to appreciate that provisions of section 68 does not apply in respect of capital and share premium received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. Share Capital (5,77,194 shares at ₹ 10 each) 57,71940 Share Premium (Rs. 166/ share*577194) 9,58,14,204 Total 10,15,86,144 5.1 The Ld AR invited our attention to the copies of the Foreign Inward Remittance certificates and submitted that they evidence the date of payment, amount of inward remittance and the name of the remitter. The assessee had allotted shares to the new investors mentioned above and had filed the return of allotment with the Registrar of Companies in form. 2 as required under the Companies Act 1956. The assessee also reported the transaction of non-resident investment of 577194 equity shares of ₹ 10/ - each into its share capital at a premium ₹ 166/- per share to the Reserve Bank of India in form FCGPR dated 29.6.2009 and the same was acknowledged by RBI, vide its letter dated 8.1.2010. For the issuance of shares at premium, the assessee had followed the guidelines for valuation as prescribed under the Foreign exchange Management Act and the valuation as per the Chartered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m shares have been issued at premium resulting in the credit to the share capital and share premium account had sold their shareholding in M/s Carlisle had The source for the credits in the books of accounts of the appellant is on account of transfer of shares to the erstwhile shareholders of the subsidiary. All the transactions have been routed through banking channels and the full details of the names and address of the parties in the agreements and the Remittance certificates are available. The assessee had provided complete identity of the new shareholders arid also established the genuineness of the transaction beyond all doubts before the assessing officer, The assessee has also complied with all the relevant statutory provisions like filing of the ROC returns and reporting of the transaction with the Reserve Bank of India. 5.3 With regard to the credit worthiness of the investor, the assessee drew our attention to the share transfer agreement between the assessee and the subsidiary dated 06.04.2007 and its subsequent compliances through banking channel etc.Upon purchase of the shares from the non residents, the said Carlisle Communications Ltd became a 100% subsidiary of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share capital in the assessee s accounts is on account of investment made by them at a premium. This is established by the share purchase agreement. In view of the above, it is submitted that the assessing officer/ the Ld CIT (A) grossly erred in holding that the explanation of the assessee regarding the credit to the share capital and share premium account is not satisfactory. It is submitted that the conclusion of the Lower authorities are against the facts and circumstances of the case and against the law. In view of these submissions, the Ld AR pleaded to allow the appeal and render justice. 6. Per contra, the Ld. junior standing Counsel invited our attention to the findings recorded by the AO that the assessee company had source for only 3,60,000 U.S.D. whereas by means of share transfer and purchase agreement the assessee company has boosted its balance sheets to show credits of ₹ 10.15 crores in its books for the relevant year. Further, he invited our attention to share valuation made by the assessee through a CA as on 31.3.2007 at ₹ 48 per share on the basis of Earnings Capitalisation Method and ₹ 23 per share as per Net Asset Method. This being so, as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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