2022 (7) TMI 375 - AT - Income Tax

Addition u/s 56(2)(viib) - difference between the fair market value and actual consideration received by the appellant on issue of shares - marginal difference of 1.1% was on account of rounding off the value per share to the nearest hundred and therefore the provisions of section 56(2)(viib) were not attracted and the addition was required to be deleted - HELD THAT - The Hon ble Apex Court has time and again held that, in a taxing statute one has to look merely at what is clearly said in the section . There is no room for any intendment. There is no concept of equity in tax law. Nothing is to be read in, nothing is to be implied. One has to look at plain language of the provisions of the section. For the purpose of construction of a taxing statute, the context, scheme of the relevant provision as a whole and its purpose is relevant. Where the statute is absolutely clear and unambiguous, recourse to beneficial/purposive interpretation cannot be taken. The Rule of literal interpretation would apply. Departure from literal rule while interpreting section is an exception, that too where literal rule would result in absurd construction of provision. In the instant case the provisions of section 56(2)(viib) of the Act or Rule 11UA no where provides for rounding off to nearest rupee or multiple of ten or hundred. The provisions are plain, clear and unambiguous. Thus, in the light of above observation, the impugned order is upheld and the appeal by assessee is dismissed.

Summary

Issues involved:
- Interpretation of section 56(2)(viib) of the Income Tax Act, 1961 regarding the addition made on account of rounding off the fair market value of shares.
- Application of the concept of rounding off to the nearest multiple of hundred in determining the fair market value of shares under Rule 11UA(c) of the Income Tax Rules, 1962.

Detailed Analysis:

Issue 1: Interpretation of section 56(2)(viib) of the Income Tax Act, 1961
The case involved two appeals by different assessees for the assessment year 2014-15 with identical issues and grounds of appeal. The primary contention was whether the addition of Rs. 48,75,000 under section 56(2)(viib) was justified due to the difference between the fair market value and the actual consideration received on the issue of shares. The assessee argued that the rounding off of the fair market value to the nearest multiple of 100 was done in good faith and should not attract the provisions of section 56(2)(viib). The Department, however, argued that the plain reading of the section did not allow for such rounding off and cited relevant case law to support their position.

Issue 2: Application of rounding off under Rule 11UA(c) of the Income Tax Rules, 1962
The assessee justified the rounding off of the fair market value of shares by referring to provisions in other sections of the Act such as section 288A, 288B, and section 115VG(5), which allow for rounding off in specific circumstances. They argued that the concept of rounding off to the nearest multiple of hundred is prevalent in various fiscal laws and should be applied in this case as well. However, the Tribunal held that the provisions cited by the assessee were specific and did not extend to section 56(2)(viib). The Tribunal emphasized that the plain language of the provisions did not provide for rounding off in this context, and the decision of the Kolkata Bench in a similar case supported this interpretation. The Tribunal concluded that the provisions were clear and unambiguous, and therefore, the appeal by the assessee was dismissed in both cases.

In summary, the Tribunal upheld the addition made under section 56(2)(viib) as the provisions did not permit rounding off of the fair market value of shares, and the arguments based on other sections of the Act were deemed inapplicable. The decision highlighted the importance of interpreting tax statutes based on their plain language and the specific provisions mentioned therein.