2023 (8) TMI 1480 - AT - Income Tax

Addition of share premium u/s 56(2)(viib) - assessee submitted that it had borrowed money from certain persons in the past and a part of those loans was converted into the equity shares - whether the conversion of loan taken in the past into equity shares with share premium would be hit by the provisions of sec.56(2)(viib)? - HELD THAT - As shares premium collected by the assessee was more than the valuation arrived at by the auditor in the valuation report. We notice that this question has been examined and adjudicated by the Kolkata Bench of the ITAT in Milk Mantra Dairy Private Limited 2022 (7) TMI 1490 - ITAT KOLKATA wherein it has been held that the conversion of loan amount into the equity shares will not exonerate the assessee from application of provisions of section 56(2)(viib) of the Act. Before us no contrary decision was placed or any distinguishing fact, which would compel us to interfere with the decision rendered by the tax authorities, was furnished. CIT(A) was justified in confirming the assessment of excess share premium amount as income of the assessee u/s 56(2)(viib) - Appeal filed by the assessee is dismissed.

Summary

Issues:
Challenge to addition of share premium under section 56(2)(viib) of the I.T. Act for A.Y. 2014-15.

Analysis:
The appeal was filed by the assessee against the order of the CIT(A) confirming the addition of Rs. 1,41,11,192/- as share premium under section 56(2)(viib) of the I.T. Act. Despite multiple adjournments, the assessee did not appear, leading to an ex-parte disposal of the appeal. The Assessing Officer had assessed the excess share premium amount based on the valuation report filed by the assessee, which valued shares at Rs. 660/- per share. The CIT(A) rejected the assessee's contention that the conversion of loans into equity shares with share premium should not fall under section 56(2)(viib) of the Act, citing a precedent from the Kolkata Bench of the ITAT. The Tribunal upheld the CIT(A)'s decision, emphasizing that the share premium exceeded the auditor's valuation, and the conversion of loans into equity shares does not exempt the assessee from the provisions of section 56(2)(viib) of the Act. No contrary decision or distinguishing fact was presented to warrant interference with the tax authorities' decision, leading to the dismissal of the assessee's appeal.

In conclusion, the Tribunal affirmed the order passed by the CIT(A) and dismissed the appeal filed by the assessee.