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TMI Blog2021 (7) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... tion for issue of shares. We are of the considered view that there is no merit in arguments of the DR that the assessee is outside scope of Gazette Notification dated 19.02.2019 and hence, share premium issued on issue of shares is covered u/s. 56(2(viib). In this view of the matter and considering facts and circumstances of the case, we are of the considered view that assessee is a recognized startup from DPIIT, Ministry of Commerce Industry, Govt. of India and hence, it is outside scope of the provisions of section 56(2(viib) of the Act, in respect of consideration received for issue of shares at premium. The learned CIT(A), after considering relevant facts has rightly deleted additions made by the Assessing Officer. Hence, we are inclined to uphold findings of the learned CIT(A) and dismiss appeal filed by the Revenue. - I.T.A.No.1562/Chny/2019 & C.O.No.83/Chny/2019 - - - Dated:- 24-6-2021 - Shri Duvvuru Rl Reddy, Judicial Member And Shri G. Manjunatha, Accountant Member For the Appellant : Mr. G.Johnson, Addl.CIT For the Respondent : Mr. Vivek Rajan, C.A ORDER PER G.MANJUNATHA, AM: This appeal filed by the Revenue and Cross Objection filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness, the Hon ble ITAT is requested to uphold the addition of ₹ 2,72,80,664/- under section 68 of the IT Act,1961. 6. The Hon ble ITAT is requested to cancel the order of the learned CIT(A)-1, Coimbatore and uphold the order of the Assessing Officer on the issue of addition to the made u/s 68 of the IT Act. 3. At the outset, learned AR for the assessee submitted that the cross objection filed by the assessee is time barred by 20 days for which necessary petition for condonation of delay along with affidavit explaining the reasons for the delay has been filed. The AR further submitted that the assessee could not file cross objection within the time allowed under the Act, due to the fact the Authorized Representative was fell ill with chicken pox. The delay in filing cross objection is neither intentional nor willful but for the unavoidable reasons, therefore, delay may be condoned in the interest of advancement of substantial justice. 4. The learned DR, on the other hand, strongly opposing condonation of delay petition filed by the assessee submitted that the reasons given by the assessee do not come within the ambit of reasonable and bonafide reasons, which can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to him, although, the assessee has filed valuation report in support of issue of share capital at premium, but such valuation report is not obtained as required under rule 11UA(2)(b) of the I.T. Rules, 1962 and further projected figures adopted in the discounted cash flow method is also without any basis. Therefore, he opined that market value of equity shares as worked out by the company is arbitrary and without any justification and hence, he invoked provisions of section 56(2)(viib) of the Act and excess premium charged from resident investors/subscribers totaling to ₹ 2,72,80,664/- is brought to tax as income of the assessee. 7. Being aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee reiterated its arguments taken before the Assessing Officer and claimed that it is a start up company and hence, provisions of section 56(2(viib) of the Act does not apply, where consideration for issue of shares is received from class of persons notified by Central Government, subject to such other conditions as may be specified. The assessee further submitted that it has obtained a certificate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation number GSR 180(E) dated 17.02.2016. 5. Gazette notification GSR 127(E) dated 19.02.2019 clearly exempts start up from the ambit of section 56(2)(viib) of the Income Tax in section 4 of the said notification. Section 4 is reproduced below: 4. A Startup shall be eligible for notification under clause (ii) of the proviso to clause (viib) of sub-section (2) of section 56 of the Act and consequent exemption from the provisions of that clause if it fulfils the following conditions: (i) It has been recognized by DPHT under para 2(iii)(a) or as per any earlier notification on the subject (ii) aggregate amount of paid up share capital and share premium of the startup after issue or proposed issue of share, if any, does not exceed, twenty five crore rupees . 5.1. The AO has at no point of time questioned and doubted that the appellant is a startup company. Proceeding on the assumption that the company is a startup company and one which satisfied all conditions given in the relevant notifications referred above, I hold that the provisions of section 56(2)(viib) would not be applicable in the light of CBDT notification No.45/2016 (supra) and section 4 of the Ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the assessee is outside the scope of provisions of section 56(2)(viib) of the Act. The learned AR further referring to paper book filed by the assessee submitted that the CBDT vide its notification No.173/354/2019 dated 9th August, 2019 has clarified applicability of para 6 of Gazette Notification No.127E dated 19.02.2019, after considering hardships considered by startup companies involving application of section 56(2)(viib) of the Act and clarified that said notification will be applicable to those startup companies also, where addition u/s. 56(2)(viib) of the Act has been made in assessment order under the Income Tax Act before 19th February,2019, provided the assessee has specifically submitted declaration in Form No.2 that it fulfilled conditions mentioned in para 4 of the above referred notification. The assessee thereafter, has filed Form No.2 in pursuance of para 5 of Notification dated 19.02.2019 on 23rd August, 2019 and in response, the CBDT vide its notification F.No.173/147/2019-ITA-1 dated 28th August, 2019 has clarified that assessee is a recognized startup as per DPIIT and hence, is outside scope of provisions of section 56(2)(viib) of the Act. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.GSR 127(E) dated 19.02.2019, has categorically stated that the assessee is exempt from ambit of section 56(2(viib) of the Act and hence, consideration received for issue of share capital and share premium is outside scope of section 56(2(viib) of the Act. He further observed that since the assessee is outside ambit of section 56(2(viib) of the Act, issue of non-applicability of Rule 11UA(2)(b) of the Income Tax Rules, 1962, therefore, become infructuous and hence, the question of substantiating value of shares does not arise. Therefore, we are of the considered view that the learned CIT(A) has rightly held that share premium collected by the assessee for issue of share capital is outside scope of the provisions of section 56(2(viib) of the Act. 12. As regards arguments of the learned DR in light of para 6 of Gazette Notification GSR 127(E) dated 19.02.2019, we find that the CBDT, after considering hardships faced by startup companies with regard to application of section 56(2(viib) of the Act, as per Gazette Notification dated 19.02.2019, has issued clarificatory notification dated 9th August, 2019 and clarified that said notification will be applicable to startup companies ..... X X X X Extracts X X X X X X X X Extracts X X X X
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