TMI Blog2019 (1) TMI 1328X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT vs. Orissa Corporation Pvt. Ltd. [1986 (3) TMI 3 - SUPREME COURT]. - Decided in favour of assessee. - I.T.A No. 2275/Kol/2016 - - - Dated:- 5-12-2018 - Shri A T Varkey, JM, And Shri M.Balaganesh, AM For the Appellant : Shri Saurabh Kumar, Addl. CIT Sr. DR For the Respondent : Shri Manish Tiwari, AR ORDER PER M.BALAGANESH, AM 1. This appeal by the Revenue arises out of the order of the Learned Commissioner of Income Tax(Appeals)-4, Kolkata [in short the ld CIT(A)] in Appeal No. CIT(A), Kolkata-4/10381/15-16 dated 30.09.2016 against the order passed by the ITO, Ward- 10(4), Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short the Act ) dated 12.03.2015 for the Assessment Year 2012-13. 2. The only effective issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in deleting the addition made towards share premium in the sum of ₹ 2,70,45,800/-, in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee company raised share capital and share premium during the year under appeal. The ld. AO observed that since there was no substantial busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) that it had furnished various documentary evidences substantiating the share capital along with share premium. The documents so furnished inter alia included copies of income tax return acknowledgement of shareholders, the statement of source of funds, audited financial statements, copies of relevant bank statements in respect of accounts from which share application monies were paid , PAN, address of share subscribers for the year ended 31.03.2012. The assessee also furnished a copy of return filed, allotment of shares in form no. 2 filed with ROC. The assessee filed certificate of incorporation of all the shareholders companies together with share allotment letters issued to them. The assessee also submitted each of the assessee subscriber company was regularly assessed to income tax and the payments towards share capital and share premium amounts were made by them to the assessee through their respective bank accounts. It was also submitted that the notice issued u/s 133(6) of the Act to the share subscribers independently were duly complied with by them before the ld. AO. Even the details called for u/s 131 of the Act were also complied with by the assessee. It was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2012 with effect from 01.04.2013 which reads as under: [(viib) Where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares: Provided that this clause shall not apply where the consideration for issue of shares is received- (i) by a venture capital undertaking from a venture capital company or a venture capital fund; or (ii) by a company from a class or classes of persons as may be notified by the Central Government in this behalf. Explanation.-For the purposes of this clause, (a) the fair market value of the shares shall be the value- (i) as may be determined in accordance with such method as may be prescribed; or (ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, fra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e routed through proper banking channels and duly reflected in their respective books of accounts which proves the genuineness of the transaction beyond doubt. He also observed that all the share applicants explained their respective source of funds in their replies to 133(6) notice directly before the ld. AO and that the net worth of each of the share subscribers are far higher than the amount of investments made by them in the assessee company, which clearly proved the creditworthiness of the share subscribers to make investments in the assessee company. He held that the very fact that notices u/s 133(6) were duly served on the respective share subscribers and that they were duly replied with by them directly before the ld. AO, proves their identity beyond doubt. Hence, he held that all the three ingredients of section 68 namely the identity of the share subscribers, creditworthiness of the share subscribers and genuineness of the transaction were proved in the instant case by the assessee. 5.1. He also held that the provision of section 56(2)(viib) of the Act is applicable only from assessment year 2013-14 and the same cannot be made applicable for earlier assessment year. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irectors of the share subscribing companies. In our considered opinion, for this reason alone, there cannot be any addition u/s 68 of the Act as held by the Hon ble Supreme Court in the case of CIT vs. Orissa Corporation Pvt. Ltd. reported in 159 ITR 78 (SC). We find that the decision of Hon ble Delhi High Court in the case of Novo Promoters and Finelease Pvt. Ltd. reported in 342 ITR 169 (Del) vehemently relied upon by the ld. DR before us, is not applicable in the instant case, as in the facts before the Hon ble Delhi High Court, the notices u/s 133(6) have not been duly complied with. Hence the decision rendered by the Hon ble Delhi High Court in the case referred to supra is not applicable to the facts of the instant case and is factually distinghuishable.. 6.1. We find that the reliance placed by the ld. AR in the decision of Hon ble Bombay High Court in Pr. CIT vs. Apeak Infotech reported in 88 Taxmann.com 695 dt 08.06.2017 wherein the question raised before the Hon ble Bombay High Court are as under: A. Whether on the facts and circumstances of the case and in law, the Tribunal was correct to uphold the decision on Commissioner of Income Tax (Appeals) that the sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment. Therefore, admittedly, the Assessing Officer did not invoke section 68 of the Act to bring the share premium to tax. Similarly, the Commissioner of Income-tax (Appeals) on consideration of facts, found that section 68 of the Act cannot be invoked. In view of the above, it is likely that the Revenue may have taken an informed decision not to urge the issue of section 68 of the Act before the Tribunal. (d) We may also point out that decision of this court in Major Metals Ltd. v. Union of India [2012] 19 taxmann.com 176/207 Taxman 185/[2013] 359 ITR 450 Bom. proceeded on its own facts to uphold the invocation of section 68 of the Act by the Settlement Commission. In the above case, the Settlement Commission arrived at a finding of fact that the subscribers to shares of the assessee company were not creditworthy inasmuch as they did not have financial standing which would enable them to make an investment of ₹ 6,00,00,000 at premium at ₹ 990 per share. It was this finding of the fact arrived at by the Settlement Commission which was not disturbed by this court in its writ jurisdiction. In the present case the person who have subscribed to the share and pai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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