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2019 (1) TMI 2060 - AT - Income TaxAddition u/s 68 - unexplained cash credit - shares issued by the assessee company other than cash (barter system) under an agreement - HELD THAT - This is a simple case of acquiring shares of certain companies from certain shareholders without paying any cash consideration and instead the consideration was settled through issuance of shares to the respective parties. Moreover in the balance sheet of the assessee company in the schedule to share capital it is very clearly mentioned by way of note that the fresh share capital was raised during the year for consideration other than cash. Hence we hold that provision of section 68 are not applicable in the instant case and accordingly the entire addition deserves to be deleted which has rightly been done by the CIT(A) which does not require any interference. Accordingly grounds raised by the revenue are dismissed.
The appeal filed by the Revenue was directed against the order of the Commissioner of Income Tax (Appeal) concerning the assessment year 2008-09. The primary issue for consideration was whether shares issued by the assessee company under a barter system could be treated as cash credit under section 68 of the Income Tax Act, 1961.
The Revenue's appeal was initially barred by a five-day delay, which was condoned by the Tribunal after considering the reasons for the delay and hearing both parties. The Tribunal then proceeded to examine the substantive issue raised by the Revenue. The core issue revolved around the interpretation of section 68 of the Income Tax Act, which deals with unexplained cash credits. The Tribunal had to determine if the issuance of shares for consideration other than cash, specifically under a barter arrangement, could be classified as a cash credit requiring explanation under section 68. The Tribunal noted that the issue was not novel and had been previously adjudicated in a similar case involving M/s Anand Enterprises Ltd. In that case, the Tribunal had concluded that section 68 did not apply to transactions where shares were issued in exchange for other shares, as no actual cash was involved. The Tribunal observed that section 68 pertains to the receipt of a "sum of money," and in the present case, there was no receipt of any sum in monetary terms. The Tribunal referred to several legal precedents supporting this interpretation. The decision of the Hon'ble Supreme Court in Shri H.H. Rama Varma vs. CIT established that the term "any sum" in section 68 refers specifically to a sum of money. Similarly, the Allahabad High Court in CIT vs. Sohanlal Singhania and the Calcutta High Court in Jatia Investment Company vs. CIT had held that transactions not involving actual cash do not fall under the purview of section 68. The Tribunal also considered the arguments presented by the Departmental Representative, who relied on the orders of the lower authorities. However, the Tribunal found no compelling reason to deviate from its earlier decision in the M/s Anand Enterprises Ltd. case, as the facts and legal context were identical. In its reasoning, the Tribunal emphasized that the Assessing Officer had not disputed the investment made by the assessee company in shares, nor had there been any challenge to the number or value of shares involved. The Tribunal reiterated that the transaction was a straightforward exchange of shares without any cash component, as clearly indicated in the assessee's balance sheet. Ultimately, the Tribunal concluded that the provisions of section 68 were erroneously invoked by the Assessing Officer. The Tribunal upheld the decision of the Commissioner of Income Tax (Appeal) to delete the addition made under section 68, finding no basis for interference. Consequently, the Tribunal dismissed the Revenue's appeal, affirming that the issuance of shares under a barter system does not constitute a cash credit under section 68.
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