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TMI Blog2015 (11) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... es, there was search and seizure operations conducted on 29-01-2009. In response to the notices u/s. 153A of the Income Tax Act [Act], Return of Incomes were filed declaring Nil income for AY. 2008-09 and loss of ₹ 85,45,881/- for AY. 2009-10. AO in the course of assessment proceedings observed that assessee had received share application amount with ₹ 40/- premium from three applicants in AY. 2008-09. AO called for the details of the shareholders who had paid premium along with share application money and from the details furnished, AO further observed that out of the total contributors to share capital, three contributors i.e. M/s. Basuknath Developers Pvt. Ltd., M/s.Uplink Vyapar Pvt. Ltd and M/s. Corbal Suppliers Pvt. Ltd., had paid share application money @ ₹ 10/- per share and ₹ 40/- towards premium per share, thus for each share the parties have paid ₹ 50/- in total. In respect of AY. 2009-10, AO observed from the Schedule-II of the Balance Sheet, that under the head 'Reserves and Surpluses', the appellant had shown an amount of ₹ 1,35,00,000/- under share premium account. On verification of the details furnished in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P Ltd 2008-09 40,000 4,00,000 16,00,000 20,00,000 Uplink Vyapar Pvt. Ltd 2008-09 40,000 4,00,000 16,00,000 20,00,000 Corbal Suppliers Pvt. Ltd 2008-09 60,000 6,00,000 24,00,000 30,00,000 TOTAL: 14,00,000 56,00,000 70,00,000 Gyaneswar Trading Finance Co.Ltd 2009-10 5,62,500 5,62,500 22,50,000 28,12,500 Sindh Housing Development Co. Ltd 2009-10 5,62,500 5,62,500 28,12,500 28,12,500 Artilengence Bio Innovations Ltd 2009-10 5,62,500 5,62,500 28,12,500 28,12,500 Cliffon Securities (P) L 2009-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on these facts. It was also a fact that there was search and seizure proceedings conducted in this case during which no incriminating information related to these transactions were mentioned to have been traced/found. It is also a fact that either during the post search proceedings and the assessment proceedings, no enquiries were shown to have been caused or investigated, to examine the colourful device of collecting the share premium. It may be further relevant to observe that the AO has never doubted the investment in the form of share application money or share equity, by the said investors, but only doubted the genuineness of the share premium, by questioning the basis of collecting the premium, that too based on surmises and presumptions,. It is not clear as to how the share premium from the parties could be questioned without doubting the genuineness of transaction related to the share application money received from the same parties. This clearly indicate that the AO intended to treat the said share premium as business receipt and income from other sources and accordingly the AO assessed such amounts as income from other sources. Hence, question of examining the genuinene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein the Hon'ble High Courts are of the opinion that the share premium received is not taxable, observing that the amount was not a revenue receipt, to be included in the total income of the assessee. In this 'regard it may be relevant to mention that the Hon'ble ITAT, Hyderabad A Bench, while deciding the issue in Appeal No. 647/Hyd/2011 and appeal No. 135/Hyd/2013 (supra) has also relied upon the decision of High Court of Delhi in the case of Addl.CIT Vs. am Oil and Oil Seeds Company (Supra), in deciding on the issue of share premium as a capital receipt. The observation of the Hon'ble ITAT is as under: In the case of Addl. CIT V/s. OM Oil and Oil Seeds Company (152 ITR 552), the Hon'ble Delhi High Court held that the share premium received was not taxable, observing that the amounting was not a revenue receipt includible in the total income of the assessee company. S. 78 of the Companies Act, 1956 treats the premium as a special class of capital, the distribution of the share premium by way of dividend was not permitted and it is taken out of category of divisible profits. S. LB also provided for application of premium received on issue of shares and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, are not sustainable. Accordingly, the additions are ordered to be deleted . 6. Ld. DR relied on the orders of AO, whereas Ld. Counsel relied on the order of CIT(A). It was further submitted that similar issue was also decided by the Hon'ble Bombay High Court in the case of Vodafone India Services (P) Ltd vs. Union of India [2014] 368 ITR 1 (Bombay), dated 10-10-2014. 7. We have considered the issue and examined the facts on record. The only issue involved in this case in both the assessment years is treatment of share premium receipts, whether it is capital or revenue receipt. As can be seen from the above, while deleting the addition Ld. CIT(A) implicitly followed the decision of Hyderabad Bench of ITAT in the case of M/s. PVP Ventures Limited, Hyderabad in ITA Nos. 647/Hyd/2011 135/Hyd/2013, wherein it was held that the receipt as share premium is a capital receipt and cannot be considered as revenue receipt. In fact the ITAT in the above said decision also held that: The share premium cannot be brought to tax as it is a capital receipt and not on revenue account. Provisions of S.56(2) are amended by the Finance Act, 2012, so as to consider the unreasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition that share premium can be brought to tax. After perusing the above order, we are of the opinion that the facts in the said case does not apply to the facts of assessee. In fact in the above referred case, the Co-ordinate Bench at Calcutta has analysed the Modus operandi followed by that assessee in making bogus entries and helping many people in conversion of their unaccounted money into accounted transactions and availing the scheme of share premium. Moreover, that order is given in the context of proceedings u/s. 263, wherein Ld. CIT was of the opinion that adequate enquiries were not conducted by AO and the whole scheme of the case to indicate that those transactions are suspect transactions. Vide para 7, the ITAT has noticed that 'perusing of the order of the Ld. CIT passed u/s. 263 shows that on the basis of substantial information available to her that there were numerous companies which were created with bogus share capital for the purpose of money laundering, Ld. CIT has called for records and has after due verification issued show cause notice to assessee Perusing the order of Ld. CIT further shows that there are number of companies in this regard doing the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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