9911796707
TMI Blog2021 (6) TMI 500X X X X Extracts X X X X X X X X Extracts X X X X ..... ii b) s exemption since covered under the clinching legislative expression where a company, not being a company in which the public are substantially interested as per section 2(18)(b)(B)(c) of the Act since the said other company was a listed one holding more than 50% of its stake in the relevant previous year - We make it clear that the assessee had duly filed its shareholding chart before the CIT(A) (supra) whose correctness has nowhere been rebutted in Revenue s pleadings in the instant appeal. Coupled with this, the CIT(A) has also placed reliance on coordinate bench s decision (supra) adjudicating the very issue in assessee s favour and against the department. We therefore find no reason to interfere with CIT(A) s correct approach in deleting the impugned sec. 56(2)(vii b) addition in question - Decided against revenue. - I.T.A. No. 1774/Hyd./2019 with Cross Objection no.02/Hyd/2020 - - - Dated:- 10-6-2021 - Shri S.S. Godara, Judicial Member And Shri L.P. Sahu, Accountant Member For the Assessee : Shri Vartik R Choksi, A.R. For the Department : Sri Rohit Mujumdar, D.R. ORDER PER S.S. GODARA, J.M. This Revenue s appeal ITA 1774/Hyd/2019 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the Regional Director, South East Region, Hyderabad dated 31st October, 2018 passed with reference to the scheme of amalgamation. The copy of the scheme of arrangement along with order of the Regional Director, South East Region, Hyderabad sanctioning the scheme has been attached herewith vide Annexure 1. 2. For the referred appeal currently additional submissions are being made by the successor company [Sembcorp Energy India Ltd} in good faith based on the information available on record. Reference hereunder to 'the term 'appellant' as the context requires refers to Sembcorp Gayatri Power Ltd / Sembcorp Energy India Ltd. [For instance for factual points, the term appellant refers to 'Sembcorp Gayatri Power Ltd' and for legal submissions the term appellant has to be read as 'Sembcorp Energy India Ltd'} 3. In this case assessment order under section 143(3) was passed by Ld. AO in case of the appellant, assessing the income for A. Y. 2014-2015 at ₹ 8, 02, 62,170/ - after carrying an addition of ₹ 4, 52, 02,269/ - to the returned income under section 56(2)(viib) of the Act. The quantum of addition was worked out by assessing to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection triggers only in a case where the shares are issued at premium by. a company in which public is not substantially interested. There is no controversy on this aspect as the referred condition is laid down in the section itself clearly and unambiguously. Relevant portion of the section is reproduced hereunder for reference purposes Section 56(2). (viib) where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares) the aggregate consideration received for such shares as exceeds the fair market value of the shares: Provided that this clause shall not apply where the consideration for issue of shares is received- The entire shareholding of Gayatri Energy Ventures Pvt. Ltd was acquired by Sembcorp Utilities PTE Limited 26.02.2014. As on 31.03.2014, 45% of shareholding was held by Sembcorp Utilities PTE Limited. As on 01.04.2013, NCC Ltd had 100% shareholding in NCC Infrastructure Holding Ltd. Thereafter the shareholding of NCC Ltd. Changed to 67. 71% and remained the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquired unconditionally by, and were throughout the relevant previous year beneficially held by- a) the Government, or b) a corporation established by a Central, State or Provincial Act, or c) any company to which this clause applies or any subsidiary company of such company if the whole of the share capital of such subsidiary company has been held by the parent company or by its nominees throughout the previous year. Explanation.-In its application to an Indian company whose business consists mainly in the construction of ships or in the manufacture or processing of goods or in mining or in the generation or distribution of electricity or any other form of power, item (B) shall have effect as if for the words not less than fifty per cent , the words not less than forty per cent had been substituted; 5.5 Given the provision of the law, to verify the applicability of section 2(18), the factual details which follow are as under: a. NCC Ltd is a company whose shares are listed on a recognized stock exchange in India hence it is a widely held company as per clause (b) sub-item (A) of section 2(18) of the Act. b. NCC Infrastructure Holdings Ltd. i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e value as on particular date, thus again leading to different fair market values. These aspects clearly indicate of uncertainty in application of section 56 (2) (viib) of the Act because valuation as such is a subjective concept. 6.2 It is worth noticeable that considering the application of clause (ii} to sub-clause (a) of explanation appended to section 56 (2) [uiib] of the Act, even in a given case where shares are issued at value higher than as worked out according to the rules doesn't automatically lead to addition under section 56 (2) [uiib] of the Act and in cases where Id.AO is satisfied that the value at which shares are issued is justified in case facts, in such a scenario there is no warrant for carrying an addition under the referred section. The expression 'may' used in explanation to section 56 (2)(viib) of the Act clearly indicates that income accruat under section 56 (2)( uiib] of the Act is not automatic. It is for this reason that the Han, Calcutta Tribunal in the case of ASG Leather Pvt Ltd us Income Tax. Officer, Ward - 15(1), Kolkata [2018j 95 tax.mann.com 151 (Kolkata - Trib.}1[2018] 171 ITD 476 (Kolkata _ Trib.) wherein the court has la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 MW coal based thermal power project at Shri Potti Sri Ramulu [SPSR] Nellore district, Andhra Pradesh India. The company was promoted by NCC Ltd (a company listed on various recognized stock exchanges in India since 1992 and predominantly in infrastructure sector) through its wholly owned subsidiary company NCC Infrastructure Holdings Ltd (Hereinafter referred to as 'NCG' for short). In the year 2011 Gayatri group and NCC group inked a strategic partnership to pool in their resources with reference to the power project promoted by NCC Ltd through assesse company. Accordingly a share subscription agreement was executed between Assesse Company, NCCL and Gayatri Energy Ventures Pvt Ltd [Hereinafter referred to as 'GEVPL' for short in the year 2011. It accordance with the agreement, the share capital in the assesse company was to be subscribed at a premium of ₹ 3.378/- per share by GEVPL. Such take home of premium was justified in view of the following commercial factors - At that point in time with reference to the power project undertaken by the assessee company, various lucrative commercial rights were vested with the company including following - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the section was introduced in statute books, no addition under section 56(2)(viib) of the Ac.t ought to be added to appellants returned income: 7.1 The provisions of section 56 (2) [uiib] of the Act were introduced with the intention to curb the practice of circulation of black money in the form of share capital being subscribed at exorbitant prices by an incapacitate shareholder without any commercial rationale with the intention that other existing shareholder yields the disproportionate benefit of such exorbitant subscription. It was primarily introduced to combat the practice where the shares are issued at an exorbitant price without any underlying assets to support of such pricing. This aspect is highlighted by Han. Chennai Tribunal in the decision rendered in the case of Vaani Estates (P.) Ltd. vs. Income-tax Officer, Corporate Ward- 3 (4), Chennai (1352 of 2018 / IT Appeal No. 1352 (Chennai) of 20 18) 7.2 With the above background, in the current case the transaction of share allotment must be regarded to be bonafide considering the fallowing aspects and it is the contention of the appellant that provisions of section 56 (uiib] were not introduced to cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Hon'ble ITAT, Hyderabad is attached herewith vide Annexure 2 to this submission. Considering this, the assessee requests your honor to consider the above judgement of Hon'ble ITAT, Hyderabad while passing order of appeal in case of Assessee. 5. The Hon'ble ITAT 'A' Bench, Hyderabad in ITA No. 2045/Hyd/2018 in the case of Apollo Sugar Clinics Limited vs. DCIT, Circle-1(1), for A.Y. 201516 vide order dated 12.04.2019 held as under: 4. Before the CIT(A), the assessee submitted that the name of the company was changed from M/ s. Apollo Clinics (Gujarat) Limited to M/ s. Apollo Sugar Clinics Limited. It had allotted equity shares to M/ s. Apollo Health and Lifestyle Limited (AHLL) and M/s. Sanofi Synthelabo (India) Limited (SSIPL) at a premium and thereby received total amount of ₹ 70,54,53,300/ - towards share premium. The allotment of shares is as under: Name of the party No. of shares Share capital Rs. Premium Rs. SIPL 4,06,504 40,65,040 49,59,34,880 AHILL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable under other heads of income. However, for section 56(1) to apply, the amount received by an assessee must be income under the Act. The assessee also submitted that Section 2(24) defines the term as income , which does not include 'receipts on issue of shares'. The only exception to this is sub-clause (xvi) to Section 2(24) which covers share premium as in Section 56(2)(viib) of the Act. The assessee submitted that based on the above, the receipt of share premium is not taxable under the Act. Hence} the share premium may not be treated as taxable. 5. After considering the submissions of the assessee, the CIT(A) upheld the addition made by the AO by observing as under: 6.9 The submissions of the appellant have been carefully considered. The issue before me is whether the share premium has been calculated as per the market valuation and based on due diligence report. It is seen the premium has varied from 12990 in different cases. On scrutiny, the Assessing Officer pointed out that from M/ s. Sanofi Synthelabo (India) Limited, appellant charged share premium of ₹ 1220/ - while on majority share purchase in case of M/ s. Apollo Health Life Style Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 58,42,01, 700/- is upheld. 9. As regards ground Nos. 3 to 8 regarding addition of receipt in the nature of share premium, the ld. AR submitted that the year under consideration is the first year of operation and assessee-company is the second level subsidiary of M/ s. Apollo Hospitals Enterprises Ltd., (AHEL). At the time of issue of shares, assessee-company was a 99.99% subsidiary of M/ s. Apollo Health and Life Style Ltd., (AHLL) which is subsidiary of AHEL. Since AHEL is a public limited company and by virtue of Section 2(18)(vii) of the Act, the assessee-company also a company in which public are substantially interested. Hence, the provisions of Section 56(2)(viib) will not attract. This fact was also acknowledged by the Assessing Officer in his order. However, the Assessing Officer invoked provisions of Section 56(1) to bring this transaction as income from other sources. He has not considered the fact that this transaction is capital investment and not an income within the meaning of Section 14 of the Act. For this proposition, he relied on the following case law: 1. Vodafone India Services (P) Ltd., [2014] 368 ITR 1 (Bombay) 2. D.P. Sandu Bros. Chembu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction providing for the head, this residuary section cannot be called in aid . Similarly, when there is specific provision introduced by the Legislature to bring the specific transaction as income in section 56(2)(viib) because the transaction of issue of shares is capital in nature but under the circumstances as mentioned in above section, this transaction will be considered as income. 11.2 In the given case, the fact is clear that assessee has received share premium and Assessing Officer has mandate to invoke only Section 56(2)(viib) and no other section. This transaction will never fall in any of the heads of income as per Section 14 of the Act. Therefore, in our considered view, Assessing Officer is not correct in bringing this capital investment as income of the assessee after satisfying himself that assessee's case does not fall u/s. 56(2)(viib) of the Act. Therefore the addition made by Assessing Officer is deleted. 5.1 The Hon'ble !TAT, in this case has held that the addition could have been made only u/s. 56 (2)(viib) and in the facts in that case 56(2)(viib) could not have been invoked. In the present appeal, the Assessing Officer has invoked the se ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
