9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (4) TMI 1396 - AT - Income TaxAddition u/s 68 - unexplained cash credit - share capital money receipt alleged to be a barter transaction - HELD THAT - Shares were not issued for a consideration which was discharged in terms of money. The consideration was discharged by accepting the investments in the hands of the investors which were duly shown in their hands of the investors prior to the date of said transfer to the assessee company and thereafter duly shown in the balance sheet of the assessee. Section 68 is not to be invoked where consideration is discharged by way of barter system and not by paying any sum of money. Thus direct the AO to delete the disallowance. Decided in favour of assessee.
ISSUES PRESENTED and CONSIDERED
The primary issue in this appeal was whether the addition of Rs. 27,98,10,900/- as unexplained cash credit under Section 68 of the Income Tax Act, 1961, was justified. The core question was whether the share capital money received by the assessee, which was alleged to be a barter transaction rather than a cash transaction, could be treated as unexplained cash credit. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents Section 68 of the Income Tax Act, 1961, deals with unexplained cash credits. If any sum is found credited in the books of an assessee and the assessee offers no explanation about the nature and source thereof, or the explanation offered is not satisfactory, the sum so credited may be charged to income tax as the income of the assessee. The assessee argued that Section 68 is not applicable to transactions settled through barter, where no cash inflow is involved. Court's Interpretation and Reasoning The Tribunal examined whether the transactions in question involved a real inflow of cash or were merely a barter system of exchanging shares. The assessee contended that the transactions were barter in nature, involving the exchange of shares for shares, and hence Section 68 should not apply. The Tribunal noted that the assessee had provided evidence of the transactions, including names and addresses of shareholders, mode of payment, and confirmations from shareholders. Key Evidence and Findings The assessee provided evidence that the shares were issued in exchange for investments held by the investors, which were shown in their books prior to the transfer. The Tribunal found that the transactions were recorded in the books of account and there was no cash inflow involved, supporting the assessee's claim of a barter transaction. Application of Law to Facts The Tribunal applied the legal precedents cited by the assessee, which consistently held that Section 68 does not apply to transactions that do not involve actual cash inflow but are settled through barter. The Tribunal found that the facts of the case aligned with these precedents, as the transactions were non-cash and involved a swap of shares. Treatment of Competing Arguments The Tribunal considered the arguments of the Revenue, which relied on the orders of the lower authorities. However, the Tribunal found that the Revenue did not adequately address the nature of the transactions as barter and failed to counter the legal precedents cited by the assessee effectively. Conclusions The Tribunal concluded that Section 68 was not applicable in this case, as the transactions were barter in nature and did not involve any cash inflow. The Tribunal directed the deletion of the addition made by the Assessing Officer. SIGNIFICANT HOLDINGS Core Principles Established The Tribunal held that Section 68 of the Income Tax Act, 1961, is not applicable to transactions settled through barter, where no actual cash inflow occurs. This principle was supported by multiple precedents cited by the assessee. Final Determinations on Each Issue The Tribunal allowed the appeal, setting aside the order of the CIT(A) and directing the deletion of the addition under Section 68. The same reasoning and conclusion applied to the related appeal ITA No. 544/M/2018, as the issues were identical. In conclusion, the Tribunal's decision emphasized the importance of distinguishing between cash transactions and barter transactions in the context of Section 68, reinforcing the principle that the section applies only to unexplained cash credits and not to barter arrangements.
|
