TMI Blog2022 (9) TMI 1314X X X X Extracts X X X X X X X X Extracts X X X X ..... cial Member For the Assessee : Shri Vartik Choksi For the Revenue : Shri Ashok Kumar Kardam ORDER PER SANDEEP SINGH KARHAIL, J.M. The present appeal has been filed by the Revenue challenging the impugned order dated 31/08/2016, passed under section 250 of the Income Tax Act, 1961 ( the Act ) by learned Commissioner of Income Tax (Appeals) 2, Mumbai, [ learned CIT(A) ], for the assessment year 2012 13. 2. In this appeal, the Revenue has raised following grounds: 1. Whether On the facts and circumstances of the case and in law the ld. CIT(A) was correct in allowing the appeal of the assessee and deleting the addition of Rs.63,98,16,405/- made by the Assessing Officer on account of share Premium treated as income from other sources u/s.56(1) of the Income Tax Act, 1961? 2. Whether on the facts and circumstances of the case and in law the Ld.CIT(A) was correct in deciding the issue in favour of assessee solely relying on the decision of Hon'ble ITAT in the assessee's own case for AY 2009-10, without appreciating the legal position that the said issue had not attained finality since departments appeal filed u/s.260A against the said decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated in India in April 2008, and is engaged in the business of owning, operating, sourcing, developing, engineering, constructing and investing in Green or Clean Technology Infrastructure Projects. For the year under consideration, the assessee e filed its return of income on 29/09/2012, declaring loss of Rs.1,85,78,699. During the course of assessment proceedings, it was observed that the assessee has been incorporated only on 03/04/2008, and collected huge premium of Rs.63,98,16,405, on allotment of shares of face value of Rs.10, each at a premium of Rs.37=5957 per share. In this regard, the assessee was asked to furnish the details and explanation for charging such high premium. In reply, the assessee submitted that it had issued 1,70,18,340 number of shares at Rs.10 each at a premium of Rs.37=5957 per share to the subscribers and group entities. The assessee further submitted that issuance of shares at a premium was a commercial decision and as per the terms of issue. Further, the valuation was done using discounted cash flow method and the same was adopted for charging the premium. The assessee also contended that all the subscribers have explained the source of income and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd 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 India, Oriental Bank of Commerce, Indian Overseas Bank and Canara Bank which are all public sector undertakings. Therefore, to raise eyebrows to a transaction where there is so much of involvement of the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 225 ITR 792 and in the case of Brooke Bond India Ltd. VS CIT. 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. 11. The Ld. Departmental Representative has raised an altogether plea by stating that the nature of the transaction should also be judged within the parameters of the Sec. 68 of the Act. The counsel for the assessee strongly objected to this but in the interest of justice and fair play, we allowed the DR to raise this issue. For this, we draw support from the decision of the Hon ble Supreme Court in the case of Kapurchand Shrimal Vs CIT 131 ITR 451, wherein the Hon ble Supreme Court has laid down the ratio that It is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh, unless forbidden from doing so by statute. 11.1. Considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee itself is holding 99.88% of shares and in turn the assessee company s 98% of shares are held by IDFC PE Fund-II, this entire share holding structure cannot be said to generate any transaction which could be said to be sham. 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 Government of India. Therefore, considering the entire issue in the light of the material evidence brought on record, in our considerate view, the Revenue authorities have erred in treating the share premium as income of the assessee u/s. 56(1) of the Act. In our considerate view, for the reasons discussed hereinabove, we do not find it necessary to apply the provisions of Sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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