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TMI Blog2014 (1) TMI 1734X X X X Extracts X X X X X X X X Extracts X X X X ..... al provisions under the Companies Act, 1956. Further, it is an admitted fact that the assessee has not raised the arguments relevant to the provisions of section 80(3) and section 100 of the Companies Act, 1956. It is also relevant to mention here that there is no categorical finding on the essential aspect of “reduction of its capital” by the lower authorities qua the redemption of the preferential share capital. It is an admitted fact that the "capital" is a wider connotation and it is a generic term. In all fairness, we are of the opinion that the above issues must be remanded to the files of the CIT (A) for a comprehensive remand report. Therefore, we remand these issues to the files of the CIT (A) to adjudicate the matter afresh after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at and „D‟ Bench of Ahmedabad Tribunal in the case of another partner Mr. Anant Vashi on the same facts. 5. The AO has erred in levying interest u/s 234-A, B, C and also initiating penalty u/s 271(1)(c) of the Act." 3. At the outset, Shri Bhupendra K Shah, Ld Counsel for the assessee brought our attention to the basic facts and mentioned that the assessee is a Firm and the Firm is converted into a Company by name M/s. Enviro Control Associates India Pvt. Ltd. As per the books of accounts of the firm, assessee‟s partner had credit balance as on 31.3.2001 amounting to ₹ 38,74,178/-. On corporatization of the firm, in lieu of the said credit balance, assessee received ₹ 2 lakhs equity shares and 2,07,417 redeem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee of any payment by the assessee to the firm / company. Thus, the receipt of ₹ 20,74,170/- constitutes "any distribution" by the company to the assessee, the shareholder within the meaning of section 2(22)(d) of the Act. Thus, CIT (A) concluded by stating that it is a case of colourable device for distribution of accumulated profits by managing to issue preferential shares without any payment which was subsequently redeemed benefiting the assessee to the tune of ₹ 20,74,170/-. On the order of the Tribunal (supra), CIT (A) distinguished by stating that it was a case of section 2(22)(e) and not u/s 2(22)(d) of the Act. Aggrieved with the above decision of the CIT (A), assessee is in appeal before the Tribunal by raising the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was subsequently transferred to "Preferential Shares Redemption Reserve" vide Schedule-2 of the balance sheet. 6. On the other hand, Ld DR heavily relied on the order of the AO and the CIT (A). It is the case of the Ld DR that the accounts of the firm are manipulated to boost up the capital base of the assessee with the firm by awarding the assessee with goodwill and the interest on the credit balance in the capital account of the firm. There was no examination into these facts as to if the firm enjoyed goodwill at all and the value of the same quantitatively. Further, bringing our attention to the provisions of clause (d) of section 2(22), Ld DR mentioned that "any distribution to its shareholders by a company on the reduction of its ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant to the provisions of section 80(3) and section 100 of the Companies Act, 1956. It is also relevant to mention here that there is no categorical finding on the essential aspect of "reduction of its capital" by the lower authorities qua the redemption of the preferential share capital. It is an admitted fact that the „capital‟ is a wider connotation and it is a generic term. In all fairness, we are of the opinion that the above issues must be remanded to the files of the CIT (A) for a comprehensive remand report. Therefore, we remand these issues to the files of the CIT (A) to adjudicate the matter afresh after providing a reasonable opportunity of being heard to the assessee. Accordingly, the grounds raised by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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