TMI Blog2023 (7) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... case of the assessee, the share application money was received in the financial year 2011-12 and till that period neither the provision of Section 56(2)(vii)(b) was in the statute nor Rule 11U 11UA was prescribed and therefore, provisions of Section 56(2)(vii)(b) cannot be made applicable as it was brought in the statute books only w.e.f. 01-04-2013. We also take note of the decision of CIT vs Apeak Infotech [ 2017 (9) TMI 1590 - BOMBAY HIGH COURT] Amendment to section 56(2)(vilb) of the Act by the addition of proviso thereto took place with effect from 1st April, 2013. Therefore, it was not applicable for the subject Assessment year 2012-13. So for as the pre amended Section 68 of the Act was concerned, the same cannot be invoked in this case, as evidence was led by the Respondents Assessee before the Assessing Officer with regard to identity, capacity of the investor as well as the genuineness of the investment. Therefore, admittedly, the Assessing Officer did not invoke Section 68 of the Act to bring the share premium to tax. Similarly, the CITA) an consideration of facts, found then Section 68 of the Act cannot be invoked.Similarly, the amendment to Section 68 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alongwith detailed questionnaire and other notices were issued which were duly served upon the assessee. In compliance of the notices, the ld. AR of the assessee attended the case on the required dates and required details were filed by the assessee and the same were examined on test check basis. The AO during the course of assessment proceedings noticed that the assessee received the share premium of Rs. 79,90,000/-. The assessee was required to produce the relevant details relating to the above share premium. The assessee produced the required details alongwith the complete names and addresses of the concerned parties to whom the share at premium were allotted and the details of the 19 parties are mentioned at page 2 and 3 of the assessment order. The AO vide letter dated 09-03-2015 required following details u/s 133(6) from 19 parties to produce before him. (i) A copy of Memorandum and Articles of Association alongwith its return of income for the current year, audit reports and confirmations. (ii) A copy of your relevant bank accounts statements reflecting the concerned entries through which the share application money/ share premium money was paid and source of fund depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emium are: (i) The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors and creditworthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. (ii) The Assessing Officer is duty bound to investigate the creditworthiness of the creditor/ subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine or these are bogus entries of name lenders. (iii) If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful or lack creditworthiness then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act. 6.1.4. The assessment order and the subsequent remand proceedings clearly bring out the fact that the investors, who remained absent during the assessment proceedings and were not forthcoming, lacked the credit worthiness and were established to have had invested in shares of the assessee at a premium after deposits of equi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial Year 2011-12 and till that period, neither the provision of Section 56(2)(vii)(b) was there in the statute nor Rule 11U and 11UA was prescribed and thus the provision of Section 56(2)(vii)(b) cannot be made applicable. He further submitted that provisions of Section 56(2)(viib) have been brought in the statute book w.e.f. 01-04-2013 and even the Rules specified 11U and 11UA [for determining value of shares as per Explanation (a) (i) to Section 56(2)(vii)(b) have been inserted w.e.f. 29-11-2012. The ld. AR further submitted that when the shares were issued in FY 2011-12 then neither the substantive provision was there in the statute books nor even the computation provision was notified. Thus there was no occasion to apply formula laid down in the said rules. He further submitted that it is also a settled law that in the absence of machinery provisions, the computation fails and consequently, the substantive provision would also fail. In support, the AR relied upon the decision of Hon ble Apex Court in the case of CIT vs B.C. Srinivasa Setty [1981] 128 ITR 294. Since such a provision was brought w.e.f. 1-04-2013 and even the rule specified u/s 11U and 11UA has been inserted w. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court of Bombay in the case of Vodafone India Services Pvt. Ltd. for AY 2009-10 (WP No. 871/2014), wherein the Court has held, inter alia, that the premium on share issue was on account of a capital account transaction and does not give rise to income and hence, not liable to transfer pricing adjustment. It is hereby informed that the Board has accepted the decision of the High Court of Bombay in the above mentioned Writ Petition. In view of the acceptance of the above judgment, it is directed that the ratio decidenal of the judgment must be adhered to by the field officers in all cases where this issue is involved. This may also be brought to the notice of the ITAT. DRP's and CIT (Appeals)., This issues with the approval of Chairperson, CBDT. The ld. AR thus relied on the decision held in Vodafone India Services Pvt. Ltd. v. Union of India Others (2014) 368 ITR 01 (Bom HC), wherein it is held as under:- For all the above reasons, we find that in the present facts issue of shares at a premium by the Petitioner to its non-resident holding company does not give rise to any income from an admitted International Transaction. Thus, no occasion to apply Chapter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer 1(3)(2) v. General Traders (P) Ltd. vide IT APPEAL NO. 4197 (MUM) OF 2017 ASSESSMENT YEAR 2012-13 on FEBRUARY 24, 2020, wherein it was held as under- 14. From the above decision of honourable jurisdictional High Court it is abundantly clear that in the present assessment year the assessing officer was not empowered in examining the justification of share premium and the decisions referred by the assessing officer has been duly held to be not applicable on the facts of this case. The decisions referred by learned DR are with reference to those cases where the source of funds have been doubted by the assessing officer or are not established beyond doubt However in the present case there is no such doubt as the assessing officer has accepted that the sources of funds are duly explained. Further those decisions refer to the absence of the share applicants and/or their director at the given address. There is no such case made out by the Assessing Officer here. Furthermore some of the cases refer to notices returning unserved, which is not at all the case here. Hence these decisions do not fructify the revenues case in the fact of the present case. The other decisions referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cs of the Act in the hands of the assessee. In first appeal, the ld. CIT(A) has confirmed the action of the AO holding that the addition of Rs. 79.90 lacs on account of unexplained share premium made by the AO is justified and thus the Ground No. 2 of the assessee s appeal is dismissed. From the documents made available by the ld. AR of the assessee, it is noted that the ld. AR of the assessee vide letter dated 04-11-2015 addressed to the Income Tax Officer 7(2), Jaipur in compliance of Notice dated 26-10-2015 (PB 58-59) mentioned the details as under:- 2. During attending hear, the A/R request that all shares holders informed that they have sent through registered post their reply in compliance of notice u/s 133(6) dated 09-03-2015 in between 22-03-2015 to 25-03-2015. Almost all shareholders informed that they had received the above referred notice in between 19-03-2015 to 22- 03-2015. All shareholders on the request of the assessee as well as in compliance of notice came to Jaipur on 25-03-2015 but the past ld. AO refused to take that on record their present as well as their submission on the ground that these shareholders have already been delayed in their reply. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U 11UA was prescribed and therefore, provisions of Section 56(2)(vii)(b) cannot be made applicable as it was brought in the statute books only w.e.f. 01-04-2013. We also take note of the decision of Hon ble Mumbai High Court in the case of CIT vs Gagandeep Infrastructure (P) Ltd. 394 ITR 680. We also take note of the decision of Hon ble Bombay Court in the case of CIT vs Apeak Infotech 397 ITR 158, the exposition by the Hon ble High Court is summarized as under:- Amendment to section 56(2)(vilb) of the Act by the addition of proviso thereto took place with effect from 1st April, 2013. Therefore, it was not applicable for the subject Assessment year 2012-13. So for as the pre amended Section 68 of the Act was concerned, the same cannot be invoked in this case, as evidence was led by the Respondents Assessee before the Assessing Officer with regard to identity, capacity of the investor as well as the genuineness of the investment. Therefore, admittedly, the Assessing Officer did not invoke Section 68 of the Act to bring the share premium to tax. Similarly, the CITA) an consideration of facts, found then Section 68 of the Act cannot be invoked. In view of the above, it was likel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 2014 decided in 20 March 2017) has while refusing to entertain a question with regard to Section 68 of the Act has held that the proviso to Section 68 of the Act introduced with effect from Isr April 2013 will not have retrospective effect and would be effective only from Assessment year 2013-14. In view of the above, Question No Bas proposed also does not give rise any substantial question of law as it is an issue concluded by the decision of High Court in Ms. Vodafone India Services Pvt. Ltd (supra) and in the Apex Court in M/s. G.S. Homes Hotels P. Ltd. (supra). Thus not entertained. In view of the above facts, circumstances of the case and the deliberations mentioned above, we find that the said sum was received in preceding A.Y. 2012- 13, provisions of Section 56(2)(vii)(b) were in applicable and it was brought in the statute books only w.e.f 01-04-2013 and thus we do not concur with the findings of the ld. CIT(A). Hence, the Ground No. 1 of the assessee is allowed. 3.1 In Ground No. 2, the assessee is aggrieved that the ld. CIT(A) has erred in confirming the disallowance of PF Expenses of Rs. 2,24,977/-. 3.2 At the time of hearing, the Bench noted that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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