TMI Blog2019 (12) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... d:- 29-11-2019 - Ms. Sushma Chowla, Judicial Member And Shri O.P. Kant, Accountant Member For the Appellant : Smt. Deepali Chandra, Sr.DR For the Respondent : Shri R.S. Ahuja, CA ORDER PER O.P. KANT, AM: This appeal by the Revenue is directed against order dated 29/01/2016, passed by the Ld. Commissioner of Income-tax (Appeals)-3, Gurgaon [in short the learned CIT(A)] for assessment year 2012-13, raising following ground: 1. In the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of ₹ 4,31,34,701/- made on account of the difference between the fair market value of the shares and consideration received by the company from the assessee to whom bonus shares issued ignoring the fact that the provisions of section 56(2)(vii)(c) are squarely applicable to the case of the assessee. The Ld. CIT(A) has failed to appreciate that on contrary, the market value of shares has increased to ₹ 1250/- per share on 29.03.2014, just two days after issue of Bonus shares. 2. Briefly stated facts of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant. During the year, the appellant has received bonus shares from M/s Bestech India Pvt. Ltd. The AO has applied provisions of section 56(2)(vii) of the Act and made an addition of ₹ 4,31,34,701/- on account of the difference between the fair market value of the bonus shares received by the appellant and the actual consideration at which they have been allotted to her as Income from other sources'. Before, discussing the merits of the case, it will be necessary to go through the explanatory memorandum of Financial Bill 2010 w.r.t. amendment in section 56(2)(vii) which is reproduced as under:- Under the existing provisions of section 56(2)(vii), any sum of money or any property in kind which is received without consideration or for inadequate consideration (in excess of the prescribed limit of ₹ 50,000/-) by an individual or an HUF is chargeable to Income Tax in the hands of recipient under the head 'income from other sources . However, receipts from relatives or on the occasion of marriage or under a will are outside the scope of this provision. The existing definition of property f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under specific head of income. It is, therefore, proposed to amend the definition of property so as to provide that section 56(2)(vii) will have application to the 'property' which is in the nature of a capital asset of the recipient and therefore would not apply to stock-intrade, raw material and consumable stores of any business of such recipient. Thereafter, this issue was discussed in detail by Hon'ble ITAT Mumbai Bench in the case of Sudhir Menon 1IUF vs Astt. CIT- 21(2), Bandra Mumbai For AY 2010-11 in ITANo. 4887/Mum/2013 and the relevant observations are reproduced as below:- (i) The provisions of section 56(2)(vii) of the Act would not apply to bonus shares, and the argument alluding thereto arises only on account of mis -conception in respect thereof. (ii) Issue of bonus shares is by definition capitalization of its profit by the issuing company. There is neither any increase nor decrease in the wealth of shareholder (or of the issuing company) on account of a bonus issue and his percentage holding therein remains constant. (iii) What in effect transpires is that a share gets spilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the outset, the Ld. counsel of the assessee submitted that issue in dispute is covered in favour of the assessee by the order of the Tribunal in the case of the assessee itself for assessment year 2010-11 in ITA No. 5681/Del/2016. 4. The Ld. DR though relied on the order of the Assessing Officer, could not controvert submission of the Ld. counsel of the assessee. 5. We have heard rival submissions and perused the relevant material on record. In the case, the assessee has received bonus shares without paying any consideration, and fair market of which, has been held by the Assessing Officer as income in the hands of the assessee. We find that the Ld. CIT(A) has deleted the addition following the precedent in the case of Sudhir Menon (HUF) (supra). In the case of the assessee, bonus shares were also received in financial year corresponding to assessment year 2010- 11 from the same company and the AO made addition u/s 56(2)(vii) of the Act. The Tribunal in ITA No. 5681/Del/2016 has deleted the said addition following the decision in the case of Sudhir Menon (HUF)(Supra) as under: 5. We have consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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