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TMI Blog2022 (3) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... s as placed before him in respect of valuation been done by the statutory auditor, Multi-Sector Seed Capital Fund was a SEBI registered venture capital, India Venture partnership Limited was a non resident and as such provisions of Section 56(2)(viib) were not attracted upheld the addition, which is arbitrary and unjustified. 4. That the order of the Ld. CIT (A) is erroneous, arbitrary, opposed to the facts of the case and thus untenable. 2. Ld. AR at the outset inviting attention to the Paper Book filed on record submitted that the assessee has moved an application for admission of additional evidence on 24.03.2021. Referring to the same, it was submitted that the supporting documents are essential and crucial for determining the issue and hence these may be admitted. It was also his submission that these could not be filed earlier as these have been obtained only after the assessee received the order of dismissal of its appeal before the First Appellate Authority. The documents sought to be admitted, it was submitted, are genuine and relevant and need to be considered for proper adjudication. These documents, it was submitted, would show that the status of the assessee alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is admitted for fresh consideration of the issues. However, it was his prayer that the matter may be restored for verification as Tax Authorities have not had an occasion to consider the facts in the light of these documents and see how they are applicable to the assessee. The prayer without affording an opportunity to the Revenue to consider their relevance and applicability was strongly opposed. 5. We have heard the rival submissions and perused the material available on record. A perusal of the impugned order shows that the ld. CIT(A) noticed that AO on a perusal of the balance sheet and the documents etc. made available took note of the fact that the assessee company had issued both equity and preference shares at a premium. The assessee, accordingly, was required by him to show the documentary evidence, the working sheet, computation of premium per share and details of persons to whom such shares had been allotted at premium alongwith relevant documentary evidence of allotment etc. The assessee made available the relevant forms submitted to the Registrar of the companies for allotment of shares. 5.1 Considering the reply of the assessee the AO did not agree with the valuatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reholders is attached herewith. The assessee is a venture capital undertaking as per AS per Clause 2(n) of Venture Capital regulations. As per Clause 2(n) of Venture Capital regulations. (n) "Venture capital undertaking" means a domestic company (i) whose shares are not listed on a recognised stock exchange in India; (ii) which is engaged in the business for providing services, production or manufacture of article or things or does not include such activities or sector which are specified in the negative list by the Board with the approval of the Central Government by notification in the Official Gazette in this behalf. With all the above justifications and certificate submitted. There is no requirement for any D.I.P.P. registration. 3. As per proviso to Section 56(viib), it has been provided, that the provisions are not applicable where venture capital fund invests in a venture capital undertaking. Attaching herewith License of India Partnership Ltd. issued by Republic of Mauritius and SEBI Certificate issued for Multi Sector Seed Fund. 4. Copy of Ledger Account from Multi Sector Seed Fund is enclosed herewith for your reference and records. Showing investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 10 of the Income Tax Act, 1961. (iii) When confronted with all this, vide reply dated 23.02.2016, the AR of the assessee filed a completely new and different report from a new accountant regarding the valuation of shares dated 05th April 2012. The act of the assessee, completely changing it's stand has been found to be dubious and unreliable. Valuation report filed by the assessee is dated 5th April 2012 and the former report was dated 20th July 2012. Form 2 submitted to the ROC for return of allotment, dated 10/09/2012 for issuance of 1473 preference shares submitted by the assessee in the assessment proceedings also seem to be dubious as the premium per share is stated to be 0 (zero) as against premium of Rs. 3860.64/- collected by the assessee. Both Equity shares and preference shares were allotted to the investors on 15 July 2012 and 10 November, 2012. So the valuation report dated 20 July 2012 was nearer to allotment dates, as against the valuation report dated April 5th 2012. In the entire backdrop of events both the reports were liable to be negated. 7.4.1 The assessee on the other hand has contended that it was not covered by the provision of section 56(2)(viib) s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le for the regulation, supervision and inspection of all financial services other than banking institutions and global business in Mauritius. It's also not evidenced whether the investment fund and the assessee had undertaken the required permissions under Indian Laws and whether the investments were in sync with the regulations guiding IndiaMauritius DTAA. In view of the above it is clear that the assessee has not been able to buttress its claims that its activities of selling shares at a premium do not attract the provisions of Section 56(2) (viib). It is clear that the findings of the department that a substantial share premium was involved was not rebutted. Neither do the reasons canvassed suffice to overturn the conclusion arrived at by the AO to rework the premium involved under Rule 11UA of the IT Rules, 1962. The assessee itself in the ledger provided w.r.t 'Multi Sec Seed Fund' acknowledges the premium involved was Rs. 3860/-. Thereafter the alternative plea canvassed, that the second valuation, (which pre-dates the valuation rejected by the AO) and where premium of Rs. 2600/- per share had been arrived at, should be given credence to if the appellate aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chennai Bench in the case of DCIT Vs Kovai Media Pvt. Ltd. in ITA No. 1562/Chennai/2019 and C.O. 83/Chennai/2019 which has been relied upon by the ld. AR to canvass that infact the addition can be deleted at this stage itself which submission as is evident, we have not concurred with and have remanded the issue back. The remand back has been directed notwithstanding the fact that we are fundamentally of the view that the documents and their applicability needs to be considered by the AO first even otherwise for reasons which we shall elaborate hereinafter we have turned down the request for fresh examination of the additional evidences at this forum in view of the specific facts of the present case. 6.1 On a perusal of the order of the Co-ordinate Bench, it is seen that in the facts of the said case, the AO had made an addition under the provisions of Section 56(2)(viib) of the Act for the excess premium charged from resident investors/subscribers. We notice that near similar dispute was raised by the AO on the valuation of the shares in the facts of that case also. On a reading from the order it is noticed that the submissions advanced on behalf of the assessee before the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order, I find that the Assessing Officer has not addressed the issue whether the provisions of section 56(2)(viib) is applicable to the appellant. The AC has proceeded to assess the premium as income on a technical ground that the Valuation has not been done as per the provisions contained in Rule 11UA(2)(b) of the IT Rules 1962. Before we proceed to analyse whether the provisions contained in the Rules are satisfied or not, it is necessary to see whether the section 56(2)(viib) is applicable to the appellant. To analyse the same the following facts are relevant. 1. The appellant has obtained a certificate of Recognition as a 'Start Up' from the DIPP. 2. The aggregate amount of paid up share capital and share premium of start up after issue is less than 25 crores as required under notifications. 3. The provisions of section 56(2)(viib) does not apply where consideration for issue of shares is received by a company from class of persons notified by the Central Government subject to such other conditions as may be specified. Accordingly, the CBDT vide notification No.45/2016/F.No.173/103/2016, notified the persons to be the persons defined u/s.2(31), b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of the credit which could be assessed u/s.68, the issue is not adjudicated." 6.3 The Revenue in the appeal it is seen specifically took the objection before the ITAT that it was necessary to verify whether the conditions as set out in para 4 of the Gazette Notification were satisfied or not. This fact is evident from para 9 of the aforesaid order and it is extracted hereunder for the sake of completeness: 9. The learned DR submitted that the learned CIT(A) has erred in deleting additions made by the Assessing Officer towards excess share premium charged on issue of shares by invoking the provisions of section 56(2)(viib) of the Act, by holding that the assessee is outside scope of provisions of section 56(2)(viib) of the Act, without considering the fact that as per Gazette Notification GSR No. 127(E) dated 19.02.2019 vide para no.6, if the assessee issues shares at premium before the date of notification i.e 19.2.2019, then para 4 of said Notification is not applicable, hence the assessee is not outside the scope of section 56(2)(viib) of the Act. The learned DR further submitted that assuming for a moment, the assessee is covered by Gazette Notification GSR No. 127(E) date ..... X X X X Extracts X X X X X X X X Extracts X X X X
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