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TMI Blog2020 (1) TMI 852X X X X Extracts X X X X X X X X Extracts X X X X ..... t amply clear that for paying off the loan of the assessee-company, a group company has accommodated by introducing money in the form of share premium. In substance, it is not at all share premium. It is, in fact, a misuse of the corporate veil. Assessee-company has no obligation to pay back the amount received as share premium in any event. However, we also find that in this regard learned counsel of the assessee has made various submissions which interest of justice demands that this aspect of adjudication needs to be remitted to the file of the Assessing Officer. The Assessing Officer shall examine this aspect in view of our observation and the Hon'ble Apex Court s decisions referred above. The Assessing Officer shall also consider the submissions of the learned counsel for the assessee and give the assessee proper opportunity of being heard. Appeal of the assessee is allowed for statistical purposes. - ITA NO. 351/MUM/2016 (A.Y: 2012-13) - - - Dated:- 7-11-2019 - SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER Appellant by: Shri Dharmesh Shah Respondent by: Shri Rajeev Gubgotra ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in assessee s business or income generating areas and funds were diverted. The Assessing Officer further rejected assessee s contention to summon the investor on the ground that it is not the identity or capacity of the investor, but the nature of transaction, which was subject matter of discussion. Thereafter, the Assessing Officer discussed the modus operandi of companies receiving bogus share capital. In this regard, he referred to the decision of Kolkata Bench of the Tribunal in the case of Bisakha Sales Pvt. Ltd., Kolkata vs CIT in ITA No. 1493/Kol/2013. He further referred to the decision of Hon ble Supreme Court in the case of CIT vs Durga Prasad More, 82 ITR 540 (SC). Thereafter, the Assessing Officer referred to a host of decisions and finally concluded as under :- 6.2 In view of the discussion as above, the gist of the facts that emerge are recapitulated hereunder for the sake of ready reference and ease of understanding :- a. The valuation report filed by the assessee to justify the charging of share premium is not reliable as the estimated Revenue of operation is at large variance from the actual Revenue of operation in particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of Durga Prasad More (supra). He finally upheld the action of Assessing Officer by holding that the issue of share capital, share premium and accommodation entries are a very cleverly contrived guise of unexplained credit within the meaning of Section 68 of the Act. Against this order, assessee is in appeal before us. 5. We have heard both the counsels and perused the record. The learned counsel for the assessee submitted that the assessee has submitted all the necessary details regarding share capital and share premium. Regarding addition of share capital and share premium, he submitted that the same was not justified. In this regard, he referred to a catena of case laws, including that of Hon'ble Bombay High Court in the case of ACIT vs Gagandeep Infrastructure Ltd., 394 ITR 680 (Bom.) and CIT vs Green Infra Ltd., 392 ITR 7 (Bom.). He further submitted that the decision of Kolkata Bench of the Tribunal is not at all applicable. The learned counsel for the assessee further submitted that the issue of applicability of Section 78 of the Companies Act, 1956 has not been considered by the learned CIT(A) and the Assessing Officer. Hence, he cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsferred to an account to be called the securities new account. Section 78(2) of the Act provides that share premium account may be utilized for the following purpose :- (a) in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares : (b) in writing off the preliminary expenses of the company; (c) in writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company; or (d) in providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company 7.10 From the above it is apparent that but for the restriction provided u/s 78(2) the amounts credited in the share premium account would take the character of the profit and consequentially would be liable to be taxed as such. But the adherence to section 78(2) gives the share premium account the characteristic of capital receipt. In the present case before us we find that there is no examination as to whether the company has ever adhered to the prescription of the Companies Act in this regard. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1964) 34 Comp Cas 683 has observed that but for section 78 of the Companies Act share premium was profits available. Hon'ble Apex Court in CIT vs Allahabad Bank Ltd., 73 ITR 745 (SC ) has held that after Companies Act, 1956, share premium cannot be used for purpose other than Section 78(2) of the Companies Act, 1956. It is to be noted that these decisions have been rendered by Hon ble Supreme Court in the context of Income Tax Appeals. In none of the decisions referred by learned Counsel of the assessee, these decisions have been distinguished. Hence the decisions referred by learned counsel of the assessee do not fructify the assessee s case in this regard in view of the direct Supreme Court decision on the issue and case made out. 9. As held by Hon'ble Apex Court in the case of Oriental Insurance Co. Ltd. vs Meena Varyal, 5 SCC 428, an obiter dictum of Supreme Court is binding on subordinate courts in absence of direct pronouncement on that question elsewhere by Supreme Court. We further find that Hon ble Supreme Court in the case of ACIT vs Saurashtra Kutch Stock Exchange Ltd., 262 ITR 146 (SC) has expounded that non consideration of Hon ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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