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TMI Blog2019 (1) TMI 797X X X X Extracts X X X X X X X X Extracts X X X X ..... ified in allowing the license fee @ ₹ 2 Crore per month in the year under consideration. The ground no. 1 of the Revenue appeal is accordingly rejected. Addition u/s 68 - Held that:- CIT(A) had allowed the opportunity to the AO and has decided the issue only after taking into consideration the remand report submitted by the AO. However, in the year under consideration, the CIT(A) has allowed no opportunity to the AO to examine the copy of account of the customer in subsequent years and no remand report is called for. In view of the above, we deem it appropriate to set aside the order of the CIT(A) on this point and restore the matter back to the file of the AO. We direct the assessee to produce the copy of account of above three customers for subsequent years before the AO thereafter the AO will examine whether the above three parties are the regular customers and the assessee has supplied the goods to those parties in the normal course of business and whether these advances have been adjusted against such supply of goods. If it is so than the observation of ITAT would be squarely applicable and no addition would be made for trade advances received by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This appeal filed by the Revenue is directed against the order of CIT(A)-III, New Delhi dated 30.06.2011 for the Assessment Year 2007- 08. 2. Ground No. 1 of the Revenue s appeal read as under:- 1. On the fact and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of ₹ 18,00,00,000/- made by way of disallowance of excessive licence fee paid to M/s Uflex Ltd. 3. At the time of hearing before us it was pointed out by the learned counsel that this issue is squarely covered in favour of assessee by the decision of ITAT in assessee s own case in the immediately preceding year i.e. assessment year 2006-07 vide order dated 31st May, 2016. He stated in the preceding year that the ITAT accepted the payment of license fee of ₹ 2 Crore per month from 1st February, 2006. The above order of ITAT is approved by the Hon ble jurisdictional High Court vide order dated 6.11.2017 and also by the Hon ble Apex Court. He stated that when in the immediately preceding year payment of licence fee of @ ₹ 2 Crore per month is accepted by the ITAT which is approved by the Hon ble High Court and Supreme Court. There is no j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores for the remaining months from 01.02.2006 to 31.03.2006. To meet the ends of justice we therefore confirm the addition to an extent of ₹ 6 crore. Accordingly ground No. 3 raised by the revenue in assessment year 2006-07 stands partly allowed. 6. The assessee accepted the order of ITAT while the Revenue aggrieved with the order of the ITAT filed appeal before the Hon ble High Court. The High Court vide order dated 6.11.2017 in ITA No. 892/2016 upheld the order of the ITAT. The relevant finding of the jurisdictional High Court reads as under:- 7. As far as the second issue, i.e. the enhancement of licence fee is concerned, the facts are that the Assessee was originally paying ₹ 50 lakhs per months licence fee to M/s Flex Group of Companies. During the Assessment Years in question, the fee was revised mid-term to ₹ 2 crores per month. The AO add ₹ 9 crores, upon an understanding that the licence fee increased was arbitrary. The CIT(Appeals), however, deleted this entire amount. The Revenue s Appeal succeeded substantially to the extent of ₹ 6 crores. 8. Having regard to these circumstances, the Court finds no justification to inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before the Hon ble Jurisdictional High Court in this regard. The learned DR on the other hand stated that from page 12 para 10 of the assessment order, it is evident that the assessee had received the advance of more than 14 Crore from customers which was outstanding as on 31st March, 2007. The Assessing Officer has added the advance received from three parties only because in their cases, the advance was received in cash. The Assessing Officer has also observed that the assessee was asked to produce these parties for verification and examination which was not done by the assessee. She further stated that before the CIT(A) the assessee has produced the copy of account of above three parties for subsequent year on the basis of which the CIT(A) allowed the relief. She stated that copy of account of subsequent year were never produced before the AO therefore, the same was additional evidence and if the CIT(A) had admitted additional evidence, he should have allowed an opportunity to the AO to examine the same. She therefore stated that the admission of additional evidence and reliance thereon by the CIT(A) without allowing any opportunity to the Assessing Officer is in violation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of Ld.CIT (A), the revenue is in appeal before us now. 20.1 We have perused the orders of the authorities below and the relevant pages of the paper book preferred by Ld.CIT (A). It is observed from the remand report and the assessment order that the assessee has filed Ledger accounts of the concerned parties before the AO. The trade customers as appearing in the list are the regular customers making purchases from the assessee from past many years it is evident from the Ledger account for the current as well a subsequent years shows that the assessee has been supplying goods to these parties in the normal course of the business and therefore the realisation of proceeds thereof is an ongoing process during the course of the business activity. The only finding of the AO that the assessee has not been able to produce confirmations from few of the parties cannot be the basis to arrive at a conclusion that these are unverifiable and unconfirmed. 20.2 In view of the above findings and observations we are of the considered opinion to uphold the findings of the Ld. CIT(A). Accordingly ground No. 5 raised by the revenue for assessment year 2006-07 stands dismissed. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unexplained cash credit for the following reasons :- I have carefully considered the whole issue and the explanation put forth on behalf of the assessee. However, the following peculiarities have been noticed in this matter : i. The amount of premium charged per share in this case is ₹ 190/-. The amount of premium charged is much higher than the general market trend of that time. ii. The assessee company has not issued shares to any other person or company during the year and therefore, the premium charged is not comparable with any instance so as to justify the assessee s claim. iii. The benefits accruing to M/s Adhyay Equi Pref Pvt.Ltd. by acquiring shares of the assessee company at such a high premium have not been satisfactorily explained. iv. The reasons why M/s Adhyay Equi Pref Pvt.Ltd. chose to invest a heavy amount of ₹ 20,00,00,000/- at a such a high premium in the assessee company have not been properly explained. v. The amount of ₹ 20,00,00,000/- has been paid by M/s Adhyay Equi Pref Pvt.Ltd. through cheques between the period from 20.2.2007 to 13.3.2007. From a perusal of the concerned bank account of this company, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 190/-. During the year under consideration the assessee has allotted 10,00,000 equity shares to M/s Adhyay Equi Pref Pvt.Ltd. and a detailed letter dated 23.12.2010 to premium has been submitted by appellant before ld.AO. Copy attached at Page No.167 to 188 of Paper Book. That regarding the alleged high rate of premium @ ₹ 190/-, it is contended that the premium charge is not very high. The valuation of share of appellant company was done by an independent Chartered Accountant and accordingly the value of share, on the basis of Net Asset Value (NAV) linked to book value multiple, comes to ₹ 200.52 per share. That the value per share based on the price ratio earning per share comes to ₹ 364/- and on the basis of the discounted cash flow method comes to ₹ 310.77 per share. The value of shares was decided after a long deliberations with the investor, and ultimately, value based on NAV linked to book value multiply method was chosen, which comes to ₹ 200.52 per share and accordingly, the shares were issued at a premium of ₹ 190/- per share. 2. The second observation of the AO is that the assessee has not issued sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- (i.e. at the lowest valuation). Apart from this as already explained above the value of share on the basis of selected method as on Dec. 2009 comes to ₹ 450/- per share. Hence, there are justifiable reasons with the investor company to invest in the equity share of the appellant company. Without prejudice to the above, even if it is assumed that the premium charged is very high, it is humbly submitted that this is the discretion of the investor company. As far as the assessee is concerned, neither it has any control or influence over the investor company nor it is concerned about that. 5. The 5th observation of AO is that the amount of ₹ 20.00 crores has been paid to M/s Adhyay Equi Pref Pvt.Ltd. through cheques between the period from 20.02.2007 to 13.03.2007. Further, the AO observed that as on 19.02.2007, the credit balance was Nil. On 21.02.2007, there are credit of ₹ 3.00 crores by way of two cheques but full description of the source is not there. Further, it was observed by the AO after this period, the fund started flowing in the bank account of Investor Company and out of these fund, the payment have been made to the assessee company. Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion money out of sale of its existing investments or realization of sundry debtors/loans and advances. It is thus clear that the investing companies had its own sources of monies to subscribe to the equity capital of assessee company. 6. Regarding the objection of AO that the credit balance in the bank account of M/s Adhyay Equi Pref Pvt.Ltd., after payment to the assessee company, remained at much lower level, it is submitted that the fact that maintaining credit balance is the sole prerogative of the investor company and is not within the domain of assessee company. With due respect, it is further submitted that by virtue of this fact, it can not be said that the funds so deposited in the investor s bank account in any way belong to the assessee company and the genuineness of the transaction and creditworthiness of the investor can be doubted. 7. In Para (vii), the AO had observed some transactions of Flex/Uflex Group and Kolkata based companies from whom Flex/Uflex Group had received share capital in the Asst. Year 2006-07. The AO had stated that M/s Adhyay Equi Pref Pvt.Ltd. is also a Kolkata based company and the appellant and Uflex group are closely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be restored. In support of her contention, she relied upon the following decisions :- (i) Suman Gupta Vs. CIT (2013-LL-0122-69)(Supreme Court). (ii) PCIT Vs. Bikram Singh ITA No.55/2017 (Delhi). (iii) Blessing Construction Vs. ITO (2013) 32 taxmann.com 366 (Gujarat)/(2013) 214 Taxman 645 (Gujarat). (iv) Toby Consultants (P) Ltd. Vs. CIT (2010) 324 ITR 338 (Delhi). (v) Sanraj Engineering Pvt.Ltd. Vs. CIT ITA No.79/2016 (Delhi). (vi) Naresh Chandra Jain Vs. CIT ITA No.335 of 2009 (Allahabad). (vii) CIT Vs. Precision Finance (P) Ltd. (1995) 82 Taxman 31 (Calcutta)/(1994) 208 ITR 465 (Calcutta)/(1994) 121 CTR 20 (Calcutta). 18. The learned counsel for the assessee, on the other hand, relied upon the order of learned CIT(A). He stated that before the learned CIT(A), the assessee has explained each and every allegation levelled against the assessee by the Assessing Officer. He stated that the shares of ₹ 10/- each were issued for ₹ 200/- each i.e., at a premium of ₹ 190/- per share. That the valuation of shares of the assessee company was got done through the expert viz., Chaturvedi Partners, Chartered Accountants. That the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res. The learned counsel further stated that the assessee has produced the following evidences for discharging the onus which lay upon it for explaining the credit :- ( i) Confirmation certification from Adhyay Equipref Pvt.Ltd. ( ii) Copy of Form No.18 filled with ROC for address proof. ( iii) Copy of PAN card number allotted. ( iv) Copy of audited annual accounts with annexure as on 31.03.2007. ( v) Certificate of sources of funds in the hands of share applicant company. ( vi) Copy of UTI bank statement of shareholder. ( vii) Memorandum of Articles of Association together with certificate of incorporation of applicant company. ( viii) Copy of extract of board meeting for investment of money in MEPL. ( ix) Copy of application for allotment of shares. ( x) Copy of Form 2 for allotment of shares. ( xi) Copy of allotment register with certificate distinctive no. of shares. ( xii) Certificate true copy of resolution passed by Board of Directors for allotment of shares to Adhyay Equi Pref Pvt.Ltd. 19. That Hon'ble Jurisdictional High Court in the case of CIT Vs. Oasis Hospitalities P.Ltd. [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds as under :- 11. It is clear from the above that the initial burden is upon the assessee to explain the nature and source of the share application money received by the assessee. In order to discharge this burden, the assessee is required to prove : ( a) the identity of shareholder; ( b) the genuineness of transaction; and ( c) the creditworthiness of shareholders. 12. In case the investor/shareholder is an individual, some documents will have to be filed or the said shareholder will have to be produced before the Assessing Officer to prove his identity. If the creditor/subscriber is a company, then the details in the form of registered address or PAN identity, etc., can be furnished. The genuineness of the transaction is to be demonstrated by showing that the assessee had, in fact, received money from the said shareholder and it came from the coffers of that very shareholder. The Division Bench held that when the money is received by cheque and is transmitted through banking or other indisputable channels, the genuineness of transaction would be proved. Other documents showing the genuineness of transaction could be copies of the sharehold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spects, identity, creditworthiness and the transaction. What is disquieting in the present case is when the assessment was completed on 31.12.2007, the investigation report which was specifically called from the concerned department in Kolkata was available but not discussed by the AO. Had he cared to do so, the identity of the investors, the genuineness of the transaction and the creditworthiness of the share applicants would have been apparent. Even otherwise, the share applicants' particulars were available with the AO in the form of balance sheets income tax returns, PAN details etc. While arriving at the conclusion that he did, the AO did not consider it worthwhile to make any further enquiry but based his order on the high nature of the premium and certain features which appeared to be suspect, to determine that the amount had been routed from the assessee's account to the share applicants' account. As held concurrently by the CIT (Appeals) and the ITAT, these conclusions were clearly baseless and false. This Court is constrained to observe that the AO utterly failed to comply with his duty considers all the materials on record, ignoring specifically the most cruc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares. Thus, as per the above decision of Hon'ble Jurisdictional High Court, the assessee has duly discharged the onus of establishing the genuineness of the transaction. The Assessing Officer has doubted the genuineness of the transaction on the ground that the share premium is very high i.e., the share of the face value of ₹ 10/- per share has been issued at ₹ 200/- per share i.e., at a premium of ₹ 190/- per share. We find that before the Assessing Officer, the assessee has filed the valuation of its shares from a firm of Chartered Accountants. The Chartered Accountants have valued the value of the assessee company shares by three different methods (i) As per Net Asset Value (NAV) method - Rs.200.52 per share (ii) As per Earnings Per Share (EPS) method - Rs.363.60 per share (iii) As per Discounted Cash Flow (DCF) method - Rs.310.77 per share 27. This valuation report is filed before the Assessing Officer and he has not given any adverse comments on the same. Thus, the assessee has du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts are furnished before the Assessing Officer, the extract of Board s Resolution by AEPP for investment in the assessee company is furnished, the director of AEPP appeared before the Assessing Officer whose statement was recorded. However, the Assessing Officer ignored all these evidences, did not make any further enquiry had he any doubt into the genuineness of the transaction and simply on the basis of presumption and suspicion made the addition of ₹ 20 crores. In our opinion, on the facts of the assessee s case, the decision of Hon'ble Jurisdictional High Court in the case of Oasis Hospitalities P.Ltd. (supra) as well as Anshika Consultants Pvt.Ltd. (supra) are squarely applicable and, respectfully following the same, we hold that the assessee has proved the genuineness of the transaction. C. Creditworthiness 29. As per Hon'ble Jurisdictional High Court in the case of Oasis Hospitalities P.Ltd. (supra), the creditworthiness would be proved by producing the bank statement of the share applicant showing that it has sufficient balance in its account to enable it to subscribe to the share capital. In the case under consideration before us, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 2,71,73,987/- u/s 80-IB on account of Self Cenvat Credit availment. 33. At the time of hearing before us, it is stated by the learned counsel for the assessee that this issue is squarely covered in favour of the assessee by the decision of ITAT in assessee s own case for assessment year 2006-07. Learned DR, on the other hand, relied upon the order of the Assessing Officer. 34. We have heard both the sides and perused the material placed before us. The facts of the case are that the Assessing Officer during the course of scrutiny has noticed that in the profit loss account, the assessee has credited a sum of ₹ 2,71,73,987/- on account of Self Cenvat Credit Availment. The Assessing Officer was of the opinion that such credit cannot be considered to be income from industrial undertaking and therefore, he excluded the same while allowing deduction u/s 80IB to the assessee in respect of its manufacturing unit at Jammu. On appeal, learned CIT(A) allowed the same. Aggrieved with the same, the Revenue is in appeal before us. 35. We find that the identical issue has been considered by the ITAT in assessee s own case for assessment year 2006-07 vide ITA No.2106/Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund as a capital receipt. Learned CIT(A), following the decision of Hon ble High Court in the case of Shree Balaji Alloys Ors. Vs. CIT [2011] 239 CTR (J K) 70, accepted the assessee s claim and held that excise duty refund is capital in nature. At the time of hearing before us, the learned counsel for the assessee has pointed out that this claim of the assessee has also been accepted by the ITAT in other years in assessee s own case. However, in our opinion, in the year under consideration, the receipt can either be revenue receipt or capital receipt. It cannot be both. The assessee, in its account, has claimed the refund of excise duty as revenue receipt and considered the same while computing its income from industrial undertaking and claimed the deduction u/s 80-IB on the same. The claim was disallowed by the Assessing Officer. However, before learned CIT(A), the assessee contended that the same should be part of income. Meaning thereby, the assessee reiterated its claim before the appellate authorities i.e., before the CIT(A) as well as before us that it is a revenue receipt and part of income from eligible industrial undertaking so as to be eligible for deduction u/s 80-I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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