TMI Blog2019 (2) TMI 1773X X X X Extracts X X X X X X X X Extracts X X X X ..... . Admittedly all the 11 share applicants had sufficient net worth in the form of share capital and reserves and surplus to make investment in the share company which duly proved their creditworthiness. All the transactions were routed through regular banking channels which prove the genuineness of the transactions also. All the share applicants are duly assessed to Income Tax which is quite evident from the copy of income tax return acknowledgement filed before the Ld. AO thereby proving their identity. Also developer i.e., M/s. Nigo s Properties Ltd., had expressed their willingness to purchase from the company, the rights to further develop the property for its business purposes. Hence, we find that the assessee company had tried to capitalize on the possession of leasehold rights for a period of 99 years which could be commercially exploited by way of development for industrial purposes and accordingly, had entered into agreement with M/s. Nigo s Properties Ltd., and for such commercial exploitation the assessee had factored that future act into account for the purpose of justification of share premium from various share applicants. - Decided in favour of assessee. - ITA No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Mahavir Retail Pvt. Ltd., 2,00,000/- 8. M/s. Aditi Trade Finance Pvt. Ltd., 12,00,000/- 9. M/s. Swadist Sweets Pvt. Ltd., 9,00,000/- 10 M/s. Sitara Fincom Pvt. Ltd., 45,00,000/- 11. M/s. Padmavati Credit Capital Pvt. Ltd., 65,00,000/- 3.1. The Ld. AO sought to examine the veracity of the receipt of the aforesaid share capital and share premium and accordingly issued notices u/s.133(6) of the Act to all the 11 share applicants. Out of this, six parties responded to the notice u/s.133(6) of the Act by filing the requisite details called for by the Ld. AO; two parties on whom notices u/s.133(6) were served failed to respond to the notice by filing requisite details and for remaining three parties, notice u/s.133(6) of the Act got returned unserved. 3.2. The Ld. AO with regard to five parties from whom no replies were received in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee submitted that the Ld. AO had not drawn any adverse inference on the details submitted in the form of various documentary evidences and merely proceeded to treat the same as unexplained cash credit on the ground that notice u/s.133(6) of the Act could not be served on three applicants and no replies were received from two applicants on whom u/s.133(6) was served. The assessee submitted from the aforesaid details that it could be easily inferred that all the five share applicants are regularly assessed to income tax and hence their identity is duly proved. All the transactions were routed through regular banking channels and that the genuineness of the transactions are also proved. All the share applicants had advanced monies to the assessee company out of their available bank funds which go to prove the creditworthiness of the share applicants. Accordingly, it was pleaded that three ingredients of the Section 68 of the Act were duly proved by the assessee. 3.6. The assessee with regard to the share capital and share premium received from remaining six applicants to the tune of ₹ 1,43,00,000/- submitted that all the six parties had duly responded to the noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, building, factory or premises. There could be so many businesses which could be run without owning land, building or factory. The assessee further submitted that the receipt of share application money, share capital and share premium is a capital receipt and placed reliance on the Hon ble Delhi High Court in that regard in the case of CIT vs. Sophia Finance Ltd., reported in 205 ITR 98. It was specifically pleaded that the receipt of share premium is only a capital receipt and the provisions of Section 78 of the Companies Act only suggests how such share premium could be utilised / adjusted. Accordingly, the reliance placed by the Ld. AO of provisions of Section 78(2) of the Companies Act erroneously for justifying the additions made under the Income Tax Act is totally unwarranted. The assessee with regard to violation of shares for justification of the share premium submitted that there is no provision either in the Companies Act or in the Income Tax Act mandating the same which is relevant to the year under consideration. As has already been stated, the management of the assessee company had derived share premium amount after considering the factors like future prospects and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. DR also placed reliance on the recent decision of Hon ble Delhi High Court in the case of PCIT vs NDR Promoters Pvt Ltd. in ITA No.49/2018 dated 17/01/2019 wherein the decision was rendered in favour of the revenue. 5.2. We are in agreement with the preliminary argument of the Ld. DR that the nature and source of credit appeared in the books of the assessee are to be proved by the assessee, to that extent the onus is indeed on the assessee. In the instant case, the assessee by furnishing the name, address of the shareholders, PAN, ITR acknowledgements, copies of share applications, balance sheets, relevant pages of the bank statements had duly explained the nature of credit received in the books of the assessee as share capital and share premium and from the bank statements of the respective shareholders, it could be seen that those shareholders have sufficient bank balance on their own to make payments to the assessee. Hence, the source of credit is also proved by the assessee in the instant case. Hence, it could be safely concluded that the nature and source of credit within the meaning of Section 68 of the Act has been duly complied with by the assessee together wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions also. All the share applicants are duly assessed to Income Tax which is quite evident from the copy of income tax return acknowledgement filed before the Ld. AO thereby proving their identity. We find that the Hon ble Jurisdictional High Court in the case of CIT vs. Gagandeep Infrastructure Pvt. Ltd., in ITA No.1613/Mum/2014 dated 20/03/2017 had held as under:- 1. This Appeal under Section 260A of the Income Tax Act, 1961 (the Act) challenges the order dated 23rd April, 2014 passed by the Income Tax Appellate Tribunal (the Tribunal). The impugned order is in respect of Assessment Year 2008-09. 2. Mr. Suresh Kumar, the learned counsel appearing for the Revenue urges the following reframed questions of law for our consideration:- i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in deleting the addition of ₹ 7,53,50,000/- under Section 68 of the Act being share capital/share premium received during the year when the Assessing Officer held the same as unexplained cash credit? (ii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal. The impugned order of the Tribunal holds that the respondent-assessee had established the identity, genuineness and capacity of the shareholders who had subscribed to its shares. The identity was established by the very fact that the detailed names, addresses of the shareholders, PAN numbers, bank details and confirmatory letters were filed. The genuineness of the transaction was established by filing a copy of share application form, the form filed with the Registrar of Companies and as also bank details of the shareholders and their confirmations which would indicate both the genuineness as also the capacity of the shareholders to subscribe to the shares. Further the Tribunal while upholding the finding of CIT(A) also that the amount received on issue of share capital alongwith the premium received thereon, would be on capital receipt and not in the revenue field. Further reliance was also placed upon the decision of Apex Court in Lovely Exports (P) Ltd. (supra) to uphold the finding of the CIT(A) and dismissing the Revenue's appeal. (d) Mr. Suresh Kumar, the learned counsel appearing for the Revenue contends that proviso to Section 68 of the Act which was in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not give rise to any substantial question of law. Thus not entertained. 4. (a) Admit the substantial question of law at (ii) above. (b) The issue arising in question no. (ii) is essentially whether application of Rule 8D(2)(iii) of the Income Tax Act Rules would permit the Revenue to disallow expenditure not claimed i.e. much larger than the expenditure / debited in earning its total income. The Counsel inform us that there is no decision on this issue of any Court available and it would affect a large number of cases where similar issues arise. Therefore, this issue would require an early determination. In the above view, at the request of the Counsel, the appeal is kept for hearing on 17th April, 2017 at 3.00 p.m., subject to overnight part-heard. 5. Registry is directed to communicate a copy of this order to the Tribunal. This would enable the Tribunal to keep the papers and proceedings relating to the present appeal available, to be produced when sought for by the Court. 5.3. In the aforesaid order, the Hon ble Jurisdictional High Court had also categorically said that the proviso to Section 68 brought in by the Finance Act 2012 in the statute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee since the subscription was done through the banking channels as evidenced by bank statements which were examined by the Tribunal With regard to the capacity of the subscribers the impugned order records a finding that 98 per cent of the shares is held by IDFC Private Equity Fund II which is a Fund Manager of IDFC Ltd. Moreover, the contributions in IDFC Private Equity Fund Hare all by public sector undertakings. c) Mr. Chhotaray the learned counsel for the Revenue states that the impugned order itself holds that share premium of ₹ 490 per share defies all commercial prudence. Therefore it has to be considered to be cash credit. We find that the Tribunal has examined the case of the Revenue on the parameters of s. 68 of the Act and found on facts that it is not so hit. Therefore, s. 68 of the Act cannot be invoked. The Revenue has not been able to show in any manner the factual finding recorded by the Tribunal is perverse in any manner. (d) Thus, question No. (ii) as formulated does not give rise to any substantial question of law and thus not entertained. 5.4. The Ld. AR also stated that all the share applicant companies are still ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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