TMI Blog2019 (2) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... a question with regard to section 68 of the Act has held that the proviso to section 68 of the Act introduced with effect from April 1, 2013 will not have retrospective effect and would be effective only from the assessment year 2013-14.- Decided in favour of assessee. Disallowance u/s 14A read with Rule 8D - Held that:- As there was no exempt income claimed by the assessee in the return of income and accordingly the provisions of section 14A of the Act cannot be made applicable at all . Cases followed - CHETTINAD LOGISTICS PVT. LTD. [2017 (4) TMI 298 - MADRAS HIGH COURT], HOLCIM INDIA P. LTD. [2014 (9) TMI 434 - DELHI HIGH COURT], CHEMINVEST LIMITED [2015 (9) TMI 238 - DELHI HIGH COURT] - decided in favour of assessee. - I.T.A No. 2047/Kol/2016 - - - Dated:- 7-12-2018 - Shri A T Varkey, JM, And Shri M.Balaganesh, AM For the Appellant : Shri Saurabh Kumar, Addl. CIT Sr. DR For the Respondent : Shri D.S. Damle, FCA 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. 184/LD. CIT(A))-4/Ward-10(4)/Kol/15-16 dated 04.08.2016 ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m received ₹ 95,00,000/- Total Share Premium Received - ₹ 2,70,75,000/- Notice u/s 133(6) of the Act were issued to all the share holders which were duly replied by them directly before the ld. AO. The ld. AO observed that reply sent by the share holders were almost identical in style and submitted almost at the same point of time. One of the letters to the investors returned unserved. The summons u/s 131 of the Act was issued to the directors of the assessee company to examine the receipt of premium and the assessee was also directed to produce the directors of the share holder companies for examination of identity, genuineness of transactions and creditworthiness of the investors. The ld. AO observed that the summons issued u/s 131 of the Act did not find compliance from the directors of the assessee company. The assessee did not produce the directors of the investor companies before the ld AO. For non-compliance of the summons u/s 131 of the Act, by not producing the directors of the share holder companies, the ld. AO concluded that the share premium raised by the assessee in the sum of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the ld AO. Thus it was pleaded that the assessee had discharged its onus as described u/s 68 of the Act and established the genuineness of the transactions. It was also specifically pointed out that the ld AO grossly erred in quoting that the assessee failed to discharge its onus. It was pleaded that apart from the aforesaid documents, confirmations together with explanation with regard to immediate sources of payment of share premium were also furnished before the ld. AO. It was pleaded that the assessee also placed on record the fact that the investor companies had sufficient investible funds to make investment in the assessee company thereby proving their creditworthiness beyond doubt. It was submitted that from the aforesaid documents and evidences, the identity and creditworthiness of the share subscribers stand conclusively proved together with the genuineness of the transaction. It was submitted that the share subscribers had even established the source of source of funds in the instant case. No lacuna, infirmity, falsity or defect was established or proved in the evidences placed on record nor was the ld. AO able to prove any falsity in the explanation furnished by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir 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. The Ld. CIT(A) gave a categorical finding that the ld. AO had not doubted the identity and creditworthiness of the share subscribers and the genuineness of the transactions in respect of receipt of share capital in the sum of ₹ 14,25,000/-. While that is so, how can the same be doubted for the purpose of receipt of share premium alone. Accordingly he deleted the addition made on account of sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... themselves for deposition which was refused by the ld AO. This fact was not controverted by the revenue before us. In our considered opinion, for this reason alone, there cannot be any addition u/s 68 of the Act in the facts of the instant case. 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 share premium receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, 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 paid share p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals are dismissed. No order as to costs. 6.2. We find that the issue under dispute was the subject matter of adjudication on exactly similar facts by this tribunal in the case of ITO vs Trend Infra Developers Pvt Ltd in ITA No. 2270/Kol/2016 dated 26.10.2018 for Asst Year 2012-13, wherein the addition made towards share premium was deleted. The findings given therein are not reiterated for the sake of brevity. 6.3. In view of the aforesaid observations in the facts and circumstances of the case and respectfully following the judicial precedents relied upon hereinabove, we hold that the Ld. CIT(A) had rightly granted relief to the assessee in the peculiar facts and circumstances of the case, which in our considered opinion, does not require any interference. Accordingly, the Grounds 1 to 3 raised by the revenue are dismissed. 7. The Ground No. 4 raised by the revenue is with regard to deletion of disallowance of ₹ 2,98,571/- u/s 14A of the Act read with Rule 8D of the Rules by the ld CITA. The assessee pleaded that it had not made any investments using any borrowed funds and had not claimed any borrowed cost as expenditure in its audited financial statements fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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