TMI Blog2020 (12) TMI 1078X X X X Extracts X X X X X X X X Extracts X X X X ..... us shares does not result in any change in respect of capital structure of the company. Thus, there is no addition or alteration to the profit making apparatus and the total funds available with the company remain the same. In substance, when a shareholder gets a bonus shares, the value of the original share held by him goes down and the market value as well as intrinsic value of two shares put together will be the same or nearly the same as per the value of original share before the issue of bonus shares. Thus, any profit derived by the assessee on account of receipt of bonus shares is adjusted by depreciation in the value of equity shares held by him. In the instant case, there is no material on record to infer that bonus shares hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same to tax under the head income from other sources by holding that section 56(2)(v) and (vii) cannot be invoked by assessing authority even when the assessing authority has rightly invoked the said provision as all the ingredients are satisfied to invoke said provision? 2. The factual background, in which the aforesaid substantial question of law arises for consideration needs mention. The assessee is an individual engaged in the business of medical profession. The assessee filed the return of income for Assessment Year 2012-13 on 28.09.2012 declaring total income of ₹ 3,22,43,330/-. A search and seizure operation under Section 132 of the Act was conducted in the premises of the assessee on 12.04.2011 and during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elease of profit and therefore, provisions of Section 56(2)(vii) of the Act are not applicable to the assessee and directed deletion of a sum of ₹ 12.49 Crores. The revenue thereupon approached the Income Tax Appellate Tribunal (hereinafter referred to as 'the tribunal' for short) by filing an appeal. The tribunal vide order dated 22.10.2016 by placing reliance on the decision of the Supreme Court in 'CIT VS. DALMIA INVESTMENT CO. LTD.', 252 ITR 567 held that provisions of Section 56(2)(vii) of the Act are not attracted to the fact situation of the case and dismissed the appeal preferred by the revenue. In the aforesaid factual background, the revenue has approached this court. 4. Learned Senior counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is also argued that if an assessee subscribes to shares there can be no receipt from the company as there is no transfer when an allotment of share is made and in case of allotment of bonus shares, no benefit accrues to the shareholders. It is also argued that Section 56(2) of the Act is a part of anti abuse provision and has to be interpreted bearing in mind the object of the provision. It is also urged that the intention of the provision is to tax a benefit received by the shareholder and since, no benefit accrues to the shareholder on issuance of bonus shares, the same cannot be taxed. It is also contended that if interpretation placed by the department is accepted, there would be conflict between Section 56(2)(vii) of the Act and S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is no inflow of fresh funds or increase in the capital employed, which remains the same. The total funds available with the company remains the same and issue of bonus shares does not result in any change in respect of capital structure of the company. [See: 'GENERAL INSURANCE CORPORATION supra]. Thus, there is no addition or alteration to the profit making apparatus and the total funds available with the company remain the same. In substance, when a shareholder gets a bonus shares, the value of the original share held by him goes down and the market value as well as intrinsic value of two shares put together will be the same or nearly the same as per the value of original share before the issue of bonus shares. Thus, any profit de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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