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Issues Involved:
The judgment involves the interpretation of whether the premium on the issue of shares by a company constitutes a revenue receipt includible in the total income of the company. Summary: Issue 1: Premium on Issue of Shares The case involved three assessment years where the company issued shares at a premium, which the Income Tax Officer (ITO) considered as revenue receipts. The Assessing Officer (AO) included these amounts in the company's income under the head "Income from other sources." The company appealed, and the Appellate Authority Commissioner (AAC) deleted the additions. The Revenue contended before the Tribunal that the amounts were revenue receipts, but the Tribunal upheld the AAC's decision. Details: The company had unissued equity shares, which were later issued at a premium. The ITO concluded that the premium was not actual share premium but revenue receipts disguised as such. The AAC disagreed, and the Tribunal upheld this decision, stating that the premium was not a revenue receipt. The Revenue argued that the premium represented revenue, but the Tribunal found in favor of the company. Issue 2: Legal Interpretation The Revenue's counsel argued that the premium should be considered a consideration for creating a tenancy, akin to salami or pagri, which is taxable. Various legal authorities were cited to support this argument, emphasizing the nature of the payment and its taxability. However, the court found that the premium was a single payment for the acquisition of a lease right, akin to a capital asset, especially considering the provisions of the Companies Act, 1956. Details: The legal arguments revolved around whether the premium should be treated as a revenue receipt or a capital payment. The court analyzed the nature of the payment, citing legal precedents to support its conclusion that the premium was akin to a capital asset. The court highlighted the provisions of the Companies Act, emphasizing the treatment of share premium and its distinction from revenue. Conclusion: The court ruled in favor of the assessee, stating that the premium on the issue of shares was not a revenue receipt but a capital payment. The court found that the premium was akin to a capital asset, considering the legal provisions and precedents cited. The court rejected the Revenue's argument that the premium constituted a revenue receipt, upholding the decision of the Tribunal. No costs were awarded in the case. Judge's Separate Opinion: No separate opinion was provided by the judges in this judgment.
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