9911796707
TMI Blog2011 (8) TMI 1340X X X X Extracts X X X X X X X X Extracts X X X X ..... i) Interest from M/s. Berg Trading Pvt. Ltd. ₹ 7,15,785 ii) Interest on Project Loan ₹ 1,23,931 iii) Interest on Bank FDR ₹ 20,084 Total Interest Received ₹ 8,59,798 3. Out of the total interest received, the assessee offered ₹ 5,91,854, as revenue receipt and treated the balance interest as capital receipt and reduced the same from the cost of acquisition of the capital assets. The Assessing Officer called for an explanation as to why the difference interest income should not be taxed as a revenue receipt under section 56 of the Act. After considering the explanation of the assessee, the Assessing Officer considered only ₹ 1,44,015 as pre-operative income and treated the balance under the head Income From Other Sources . The assessee accepted this finding of the Assessing Officer. This issue is not in dispute before us. 4. Further, the Assessing Officer found that shares were issued at a premium and 23 shares holders applied for sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the assessee justifying the charging of share premium between ₹ 50 and ₹ 90 per share on allotment and rejected the same as unjustified on various reasons given in the assessment order. Suffice to say, the Assessing Officer did not agree with the method of valuation and valuation reports of the assessee. Thereafter, he referred to section 68 of the Act and treated the amount of ₹ 2,53,35,000, as unexplained cash credit and made an addition. 6. Aggrieved, the assessees carried the matter in first appeal, wherein the Commissioner (Appeals) considered various arguments of the assessee and, vide Para-6.4 of his order, recorded that the assessee has furnished documentary evidence with respect to each and every credit and that there is no finding in the assessment order disputing the evidence filed. The Commissioner (Appeals) observed that the Assessing Officer accepted a part of the transactions as explained while considering the rest of the transactions as unexplained and held that a part of the same transactions pertaining to the same party cannot be treated as unexplained. He further held that the identity, capacity and genuineness of the transactions st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Ltd., (2001) 251 ITR 263 (SC); 2. CIT v/s Lovely Exports P. Ltd., (2008) 6 DTR 30 (SC); 3. CIT v/s Divine Leasing Finance Ltd., (2008) 299 ITR 268 (Del.); 4. CIT v/s Lanco Industries Ltd. (2000) 110 Taxman 172 (AP); 5. Barkha Synthetics Ltd. v/s ACIT, (2006) 283 ITR 377 (Raj.); 6. CIT v/s First Point Finance Ltd. (2006) 286 ITR 477 (Raj.); 7. Creative World Telefilms Ltd., 333 ITR 100 (Bom.); 8. CIT v/s Electro Polychem Ltd., 294 ITR 661 (Mad.); 9. Prakash Narain v/s CIT, (1981) 20 CTR (All.) 147; and 10.CIT v/s P.K. Noorjahan, 237 ITR 570 (SC). 9. He submits that, as the identity, creditworthiness of the share holders and genuineness of the transactions are established, no addition can be made under section 68 of the Act. He also placed reliance on the decision of this Tribunal in DCIT v/s Sahara India Finance Corporation Ltd., 81 TTJ 389 (Luck.), and submits that the issue is squarely covered by this decision of the Tribunal, Lucknow Bench. He finally submits that the first appellate authority was right in holding that the transactions cannot be divided into two parts and one part be accepted and the other part treated as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted the same before the Assessing Officer. Following details of each shareholder were filed:- i) Copy of share application; ii) Copy of board resolution in case of corporate shareholders; iii) Copy of bank statement in case of corporate shareholders; iv) PAN of shareholders / applicants; v) Copy of acknowledgment of I.T. return filed by the assessee; vi) Copy of ledger account of the assessee company in the books of account of the shareholders; and vii) The latest address of the parties were furnished wherever the assessee was not available at the given address; 13. The Assessing Officer has, in fact, accepted the identity, creditworthiness and genuineness of the transaction concerning the subscription of share capital by all these 23 parties to the extent of the face value of shares amounting to ₹ 48,90,000. The Assessing Officer only doubted the premium paid by the aforesaid parties on the ground that the valuations are not fair and were excessive and added the amount under section 68 of the Act. 14. The entire addition in this case has been made under section 68, based no the ground that the assessee was not able to substanti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd then making an addition u/s 68. Such condition is bad-in-law and against the law laid down by various judgments of the Hon'ble Supreme Court and Hon ble High Courts. 15. Coming to the valuation of shares, the valuer after describing the various methods of valuation and assumptions, etc., in the valuation report filed, following final analysis is given:- S.N. METHOD VALUE PER EQUITY SHARE 1. Net asset value based on book value of assets N.A. 2. Net asset value based on intrinsic worth of assets N.A. 3. Earning capitalisation method projected figures ₹ 94 4. Profit earning capacity method projected figures ₹ 489 5. Discounted cash flow method ₹ 142 6. Market quotation of equity shares Not applicable Since different values are arrived at, considering the most important specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investment as made, the said credit towards share premium cannot be brought under the ambit of s. 68. In fact, the only basis on which the A.O. brought the part investment under the mischief of s. 68, is the unacceptability of the appellant s justification for charging share premium. The A.O. has treated the investment on account of premium as not proved solely on the ground that the charging premium is not justified on the basis of the profitability and asset value of the company. It is held that this cannot be a basis for treating the credit as undisclosed income of the appellant under s. 68 especially when the source of investment has not been doubted and identities had been established. In fact, there is no case that there are bogus shareholders. Therefore, it is held that on the facts of the case, the A.O. erred in bringing to tax the amount collected towards share premium of ₹ 2,53,35,000 as unexplained credit under s. 68 of the Act. The addition as made under s. 68 is hereby deleted. This ground is allowed. 10. We fully agree with these findings as it is legally incorrect to treat share application money to the extent of face value as a genuine transaction w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any. [emphasis supplied] 3. CIT v/s Divine Leasing Finance L. (2008) 299 ITR 268 (Del.); Held - dismissing the appeals, that the Tribunal had categorically held that the assessee has discharged its onus of proving the identity of the share subscribers . Had any suspicion still remained in the mind of the Assessing Officer he could have initiated coercive process but this course of action had not been adopted. The deletion of the additions was justified. 4. Barkha Synthetics Ltd. v/s ACIT, (2006) 283 ITR 377 (Raj.); Where the share application money is received by the assessee company through banking channel, the assessee has only to prove the existence of the person in whose name share application is received; additions could not be sustained where the existence of the investors is not doubted and the investment is not shown to have been made by somebody else. 5. CIT v/s First Point Finance Ltd. (2006) 286 ITR 477 (Raj.); The Tribunal having found that the investors are genuinely existing persons and they have filed confirmations in respect of investments made by them and their statements were also recorded, the amount of share capital / sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l were not genuine, under no circumstances the amount of share capital could be regarded as undisclosed income of the company. 4. The view taken by the Delhi High Court in CIT vs. Stellar Investment Ltd. cited supra, was confirmed by the apex Court and the same was reported in CIT vs. Stellar Investment Ltd. (2000) 164 CTR (SC) 287 : (2001) 251 ITR 263 (SC). 5. Applying the ratio laid down in the decision cited supra, we do not find any substantial question of law arises for our consideration. Accordingly, these appeals are dismissed. Conse-quently, MP No. 1 of 2007 is also dismissed. 8. CIT v/s Lanco Industries Ltd. (2000) 110 Taxman 172 (AP); The Tribunal no doubt should have considered the question of reliability of confirmation letters on the intrinsic worth and tenor of such letters. If crucial facts throwing light on the source of investment are not discernible from the letters, the Tribunal could have very well schewed those letters from consideration. But, this is a matter of appreciation of evidence and we do not think that a substantial question of law rises on that account. Moreover, we fail to see how merely by reason of unsatisfactory explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscretion has to be exercised keeping in view the facts and circumstances of a particular case . In that case, the Tribunal held that even though the explanation about the nature and source of purchase money was not satisfactory but in the facts and circumstances of the case, it is not possible for that assessee to earn the amount invested in the properties. It held that, by no stretch of imagination, could the assessee be credited for having earned this income, in the course of assessment year nor was she in a position to earn it for a decade or more. The case was of a Muslim lady who is aged about 20 years. In the case on hand, the assessee company was in the process of setting-up of a project and has not commenced production during the year and there was no possibility of the assessee company earning any such income during the course of this assessment year. The receipt in question being receipt of share premium, is a capital receipt and cannot be brought to tax. As already held, the addition is not warranted under section 68 of the Act. Hence, we uphold the order of the first appellate authority and dismiss this ground raised by the Revenue. 14. In the result, Revenue s appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
