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TMI Blog2019 (9) TMI 684X X X X Extracts X X X X X X X X Extracts X X X X ..... claim(s) on medical equipments supplied forming subject matter of impugned addition averment also stood allowed during the course of assessment itself. This tribunal s decision in M/s. ABA Earthline Communications Ltd v/s. ITO., Ward 1(4), Kolkata [ 2018 (12) TMI 972 - ITAT KOLKATA] holds that section 68 addition of unexplained cash credits in absence of actual cash credits/receipts is not sustainable - Decided in favour of assessee. Brought forward losses set off - HELD THAT:- Assessee s shareholders to the extent of 51% of its stake i.e M/s. XL Enterprises and M/s. Neon Health Care had admittedly held 27.34% and 47.73% of its stake in preceding assessment year and 26.02% and 53.87% in the impugned assessment year; respectively. Coupled with this, the CIT(A) has also held that SHRI SUBHULAXMI MILLS LTD. [ 1995 (9) TMI 2 - SUPREME COURT] settled the law long back that section 79 of the Act does not apply on brought forward losses on account of depreciation. We therefore affirm the CIT(A) s findings for this latter issue as well. - Decided in favour of assessee. - I.T. A No. 1383/Kol/2015 - - - Dated:- 13-9-2019 - Shri J. Sudhakar Reddy., AM And Shri S.S. Godara, JM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um of ₹ 68,50,000/-was received by account payee cheque and the bank statement was produced. It was submitted that the appellant also produced all the bills and evidences for purchase of machineries and equipments as well as the amount payable for pathological tests to the said party. It was submitted that the AO has not doubted the said purchase of Machinery and equipments or amount payable on account of pathological tests. It was also submitted that the said concern was an old shareholder of the appellant company holding 47.73% of the equity of the appellant company which was evident from the explanation filed on 19.3.2013. It was submitted that the AO has not disputed the explanation dated 19.3.2013. On my query with regard to the non availability of the name of the shareholder company in MCA site, it was explained that the AO did not raise the said issue in the course of assessment proceedings or in the show cause notice. It was submitted that the name of the shareholder company was changed to Desun Healthcare and Research Institute Ltd., and that this fact was also available from the purchase bills of Machinery, copy of which was duly filed before the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued by MCA and downloaded from ROC site was filed during the course of the appellate proceeding. The AO would have come to know this fact once the enquiry was made from PAN of the said company made available to the AO. It is therefore contended that the credit of the amount cannot be disputed or doubted and that in view of the above, the credit of ₹ 7,02,00,000/- could not in any way attract any adverse observation by the AO. 4.2 I have considered the submissions of the AR of the appellant in the backdrop of the assessment order. I have also gone through the materials/documents as submitted which are on record. On a careful analysis of the rival contentions taking into account the materials on record, my findings and decision thereon consequentially are as follows. There is no dispute to the fact the appellant has credited in its books of account a sum of ₹ 7,02,00,000/- as share application money received from its sister concern M/s Neon Health Care Research Institute Ltd. It is seen that in course of the assessment proceedings, the appellant filed the explanation dated 19.03.2013 which has not been contradicted by the AO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eness and creditworthiness of thereof. 4. We find no merit in Revenue s instant former grievance. It has come on record that impugned sum has come from assessee s group entity M/s. Neon Healthcare Research Institute Limited involving three components of cheuqe, medical equipments supply and pathological tests conducted involving sum of ₹ 68,50,000/-,6,00,00,000/- and ₹ 3,35,500/-; respectively. It s stand from the very beginning as per its detailed paper book running into 1-196 pages comprising of the said entity s certificate of incorporation, Master data, ledger account of share application, letter dated 18-03-2013, details of share application with the said entity s bank statement highlighting the relevant transactions, purchase invoice and challan for supply of the equipment as consideration other than cash, copies of audited financial statement, income-tax return acknowledgement of the said entity for the A/ys 2011-12 2012-13, its audited financial statement as on 31.03.2011, Form 23AC for the year ending 31.03.2010 as filed with MCA, Form 20B with R.O.C details of share application sufficinelty indicates that it had filed all the relevant deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicated is whether the addition can be made u/s 68 of the Act be made where there was allotment of shares other than by way of cash i.e. for consideration for purchase of shares of another company. This issue is covered by the order of the 'C' Bench of the Kolkata Tribunal in the case of ITO vs. M/s. Anand Enterprises Ltd., ITA No. 1614/Kol/2016 C.O No.56/Kol/2016; dt. 26/09/2018, wherein it has been held as follows:- 4. We have heard the rival submissions. At the outset; we find that the assessee had not raised any share capital by receipt of cash consideration in the instant case. The shares were issued for consideration other than cash in lieu of assessee company making investment in shares in some other company. Effectively, the assessee purchased certain shares from the aforesaid six shareholders and instead of paying cash to them, assessee company issued shares in its own company to those shareholders. Hence the assessee had made investments in shares of another company for which consideration was settled through issuance of its shares to those shareholders. Now the crucial point is whether the provisions of section 68 could be invoked in the inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional High Court in the case of Jatia Investment Company {Co.] vs. CIT reported in 206 ITR 718 (Cal) also supports the case of the assessee herein, wherein it was held as under: It is finally emphasised by learned counsel for the assessee that the ultimate result is that the firm becomes a debtor to GB and Co. and the three non-financial companies of the group got discharged. Learned counsel also emphasised that, at the worst, it can be said that the assessee-firm has received valuable assets being the said shares of the equivalent value of the debt taken over by it from the companies, i.e., ₹ 11.20 lakhs. Therefore, the question of cash credit does not come in, there being no actual passing or receipt of cash. In other words, the transactions are mere book entries. It was contended that the fact that the entries passed through the cash book could not detract from or efface the essential nature of the entries. It was also urged that the entries were passed through the cash book so that the repayment of loans by the said three companies could be established before the Reserve Bank of India. But, according to Shri Bajoria, that does not mean t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pective parties did not receive cash nor did pay cash as none had any cash for the purpose. The only point in the assessment order is that the entries not involving the passing of cash should not have found a place in the cash book, but in the ledger account through journal entries. There is another selfcontradiction in the Income-tax Officer's finding that, if there was no real cash entry on the credit side of the cash book, but merely a notional or fictitious cash entry, as admitted by him, there is no real credit of cash to its cash book; the question of inclusion of the amount of the entry as unexplained cash credit cannot arise. One of the grounds of the Tribunal for disbelieving the assessee's case is that the adjustment entries were made by notional cash entries with a view to bringing down the debt-and-capital ratio, i.e., that while being discharged of the debt the said companies also jettisoned their assets, i.e., the shares held by them of equivalent sum without achieving the avowed purpose. Here the Tribunal certainly misdirected itself. The ratio to be reduced is of the loan in relation to the share capital and the reserves. je ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital was raised during the year for consideration other than cash. Hence we hold that provision of section 68 of the Act are not applicable in the instant case and accordingly the entire addition deserves to be deleted which has rightly been done by the Id. CIT(A) which does not require any interference. Accordingly, grounds raised by the revenue are dismissed. 7. Applying the proposition of law laid down in the case-law cited above, to the facts of the case on hand, we delete the addition in question made u/s 68 of the Act. 8. In the result, appeal of the assessee is allowed. 6. We conclude in these facts that the CIT(A) has rightly deleted the impugned unexplained cash credits/share application money addition of ₹ 7.02 crores. The Revenue fails in its instant former substantive ground. 7. The Revenue s latter substantive grievance is that CIT(A) has erred in allowing assessee s brought forward losses set off claim of ₹ 5,36,66,368/- vide the following detailed reasoning:- 5. Grounds No. 4 The appellant claimed set off of brought forward losses of ₹ 5,36,66,368/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 2009-10 when more than 51% of the shares of the company were held by XL Enterprises (27.34% and Neon Health Care (47.73%) and that in the assessment year 2010- 11 these two shareholders held 26.02% and 53.87% of the shares leaving aside other shareholder who also continued to be shareholders in the company. Therefore both in the year of loss and in the assessment year in question same shareholder held more than 51 % of the shares. It was submitted that this fact was brought to the notice of the AO vide letter filed on 19.3.2013. It was therefore submitted that the action of the AO was not in accordance with law. 5.2. On a careful consideration of the rival contentions in the backdrop of the material on record, my findings and decision thereon consequentially are as follows. It is apparent that more than 51 % of the shareholders continued to be the same both in AYs 2009-10 and 2010- 11. The requirement of law is that 51% of the voting powers should be held by the same persons. There is no deviation in the same. Even otherwise, provision of section 79 is not applicable on the loss brought forward on account of depreciation as has been held by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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