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TMI Blog2021 (5) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... om the Bar. Accordingly, the Ground No. 2 raised by the revenue is allowed. 3. Though the revenue had raised several grounds before us, the only effective issue to be decided in this appeal is as to whether the ld CITA was justified in deleting the addition made in the sum of Rs. 8,07,52,945/- on account of share premium received by the assessee u/s 56(1) of the Act, in the facts and circumstances of the case. 4. We have heard the rival submissions and perused the materials available on record. We find that the assessee is a private limited company engaged in the business of manufacturing and trading of polycarbonate sheets, articles and high impact polystyrene articles. and had filed its return of income for the Asst Year 2011-12 on 29/11/2011 declaring total loss of Rs. 17,39,073/-. We find that the assessee company was incorporated in February 2010 and had commenced business operations in Asst Year 2011-12 i.e the year under consideration. 4.1. During A.Y.2011-12, Assessee had issued 7,00,000 shares at a price of Rs. 125.361351 having face value of Rs. 10 and premium of Rs. 115.361351. Accordingly, it accounted for share premium of Rs. 8,07,52,945 in the books of account for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., vs. Income Tax Officer, Ward 2(1)(3), Bangalore in ITA No.665/Bang/2017 dated 09/02/2018 in support of his contentions. 4.4. Per contra, the ld. AR argued that assessee bought business and allotted shares in kind with the same premium as was allotted to its holding company. He argued that the ld. CIT(A) had adjudicated the issue both u/s.56(1) of the Act by holding that the said receipt of share premium cannot be taxed u/s.56(1) of the Act and also by holding that the provisions of Section 56(2)(vii b) of the Act could not be invoked at all for the year under consideration as the same is applicable only from Asst Year 2013-14 onwards. He also argued that the receipt of share premium per se is capital receipt which has been held in favour of the assessee by the ld. CIT(A). 4.5. We find that there is absolutely no dispute with regard to the fact that addition has been made by the ld.AO towards receipt of share premium by treating the same as income u/s.56(1) of the Act. Hence, what is to be adjudicated by us is limited and confined to the fact as to whether receipt of share premium per se could be treated as the revenue receipt so as to make it taxable u/s.56(1) of the Act. We f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee had not contravened the section 78 or 100 of the CA, the amount in question would not have been liable to tax. In our opinion, the approach of the FAA is fundamentally wrong. The taxability of an amount has to be decided within the four corners of the Income Tax. Section 4 of the Act is the charging section and section 2 defines the word income. Even the inclusive definition of income does not stipulate that non-compliance of any provision of other Act would result in turning a capital receipt a revenue receipt. An infringement of a particular Act is dealt by that Act, unless and until it deals with other Act/(s). For example provisions of Prevention of Money Laundering Act (PMLA)provide that certain offences committed under other statutes would be considered scheduled offence under the PMLA. Without such a clear mandate nothing can be imported to be implemented to other Act/(s).While dealing with the assessment or appeals, under the provisions of the Income-tax Act, the basic principle every officer of the department has to remember that he is representing the Sovereign and his duty is to collect Due taxes only. For determining the Due taxes they should avoid bringing fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operative portion of the said order is reproduced hereunder:- 10. We have considered the rival submissions and carefully perused the orders of the lower authorities and the material evidences brought on record in the form of Paper book. The entire dispute revolves around the charging of share premium of Rs. 490/- per share on a book value of Rs. 10/- each. This dispute is more so because of the fact that the assessee company was incorporated during the year under consideration. Therefore, according to the revenue authorities, it is beyond any logical reasoning that a company with zero balance sheet could garner Rs. 490/-per share premium from its subscribers. Such transaction may raise eyebrows but considering the subscribers to the assessee company, the test for the genuineness of the transaction goes into oblivion. It is an undisputed fact admitted by the Revenue authorities that 10,19,000 equity shares has been subscribed and allotted to IDFC PE Fund-II which company is a Front Manager of IDFC Ltd., in which company Government of India is holding 18% of shares. The contributors to the IDFC PE Fund-II who is a subscriber to the assessee's share capital, are LIC, Union of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that any expenditure incurred for the expansion of the capital base of a company is to be treated as a capital expenditure as has been held by the Hon'ble Supreme Court in the case of Punjab State Industrial Development Corpn. Ltd. v. CIT [1997] 225 ITR 792/93 Taxman 5 and in the case of Brooke Bond India Ltd. v. CIT [1983] 140 ITR 272/[1982] 10 Taxman 18 (Cal.). Thus the expenditure and the receipts directly relating to the share capital of a company are of capital in nature and therefore cannot be taxed u/s. 56(1) of the Act. The assessee succeeds and Revenue fails on this account. ................ 12. We have considered the grievance of the Revenue from all possible angles and by applying the provisions of Sec. 56 of the Act and at our stage we have gone to the extent of testing the transaction within the parameters of Section 68 of the Act. We could not find a single evidence which could lead to the entire transaction as sham. Our view is also fortified by the share holding pattern as explained to us and as substantiated by the material evidence on record. We find that the share holders in all the related transaction under issue are directly or indirectly related to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal in the case of Cornerstone Property Investment Pvt. Ltd., vs. Income Tax Officer, Ward 2(1)(3), Bangalore in ITA No.665/Bang/2017 dated 09/02/2018, we find that the said decision is distinguishable on facts in as much as the ld. AO in that case had made addition u/s.68 of the Act by doubting the genuineness of the parties from whom share premium has been received. Further in that case, the ld. AO had examined the genuineness of the credits in the books of accounts by making relevant enquiries which established that assessee was acting as a conduit and part of the layering process which enabled the flow of funds to move from one company to another company. In the instant case, we find the addition has been admittedly made by the ld. AO u/s.56(1) of the Act and no such enquiries doubting the genuineness of the transactions or the genuineness of the investors were doubted by the ld. AO in the instant case. Hence, the decision relied by the ld. DR, in our considered opinion, would not advance the case of the revenue. We find that all the necessary documents relating to the allotment of shares with premium together with relevant documentary evidences were indeed submitted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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