9911796707
TMI Blog2021 (10) TMI 723X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee company, in the facts and circumstances of the instant case. 3. We have heard rival submissions and perused the materials available on record. The assessee company was registered originally in the name of M/s. Alertpay Solutions Pvt. Ltd., on 20/04/2010. Later the name of the company was changed to M/s Crescent Payments Pvt. Ltd., w.e.f. 29/01/2014. The assessee company is engaged in the business of Information Technology Enabled Services (ITES). The return of income for the A.Y.2012-13 was filed by the assessee electronically on 29/09/2010 declaring loss of Rs. 65,86,782/- under normal provisions of the Act and book profit of Rs. 64,69,719/- u/s.115JB of the Act. During the course of scrutiny proceedings, the ld. AO observed that as per the information available in Note-3 to balance sheet - "reserves and surplus", an amount of Rs. 3,46,33,388/- was shown as monies received as remittance from M/s. Alertpay, Canada without any instruction and hence, treated as gift received. The ld. AO sought to examine the veracity of the said receipt and sought explanation from the assessee company as to why the said receipt of gift be not treated as income of the assessee. A show-ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either for capital or for revenue purposes will not change the character of the receipt, as long as the said money is not received in the shape of share capital. The ld. AO also observed that the assessee itself admitted that in order to circumvent regulations of one statute i.e. FEMA, it has treated the receipt of amount as gift. With these observations, the ld. AO sought to treat the receipt of amount of Rs. 3,46,33,388/- as taxable income in the hands of the assessee. 4. The ld. CIT(A) upheld the action of the ld. AO by observing as under:- 6.2 I have carefully perused the assessment order and the submission of the appellant. It is seen that the main argument of the appellant is that it is this receipt is gift. The appellant claimed that Shri Feroz Patel, elder brother of Yusuf Patel & Zoheb Patel introduced his share capital but the appellant could not issue shares within 6 months from the date receipt of share application money which is as per requirements of FEMA hence without taking of RBI order to repatriate back the money it was treated as gift from Feroz Patel specially because he was ready to relinquish his right on shares of the appellant company by treating it as no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Graviss Hospitality Ltd. On perusal of the said decision, it is seen that it was with respect to the forfeited share application money but this is not the case here, in this case the appellant's original claim is of gift and not the forfeiture of share application money of Shri Feroz Patel. In my opinion, the appellant, first proved that its claim made in the return that it was a gift. But, in the instant case the appellant first stated that it was remittance from the Alterpay Inc Canada without any instruction and subsequently claimed that it was share application from Shri Feroz Patel and he relinquished its right. Hence/ it is not possible to understand as to actually what happened. Who made the remittance and for what purpose. If the shares were allotted to Shri Feroz Patel then for what reason the amount was remitted through the Alterpay Inc. Canada and as to why the appellant has not made such an argument before AO. Therefore, in absence of correct facts, I find force in the addition of the AO. Hence, the addition made by the AO is confirmed. Therefore, ground Nos. 1 & 2 of the appeal is dismissed." 5. We find at the outset, that the receipt of monies by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee company for purchasing the shares of the assessee company. Obviously this event happened after the receipt of original gift amount of Rs. 3,46,33,388/-. Only pursuant to this acquisition of shares by investing 153000 Canadian Dollars, the assessee company became the subsidiary company of Alertpay Quebec and not before that. Hence it could be safely concluded that at the time of receipt of monies originally in the sum of Rs. 3,46,33,388/- , which was treated as gift by the assessee company for reasons stated hereinabove, Alertpay Quebec was not the Holding Company of assessee company. Hence we hold that the observation made by the ld AO in this regard is factually incorrect. 5.2. Hence in this factual matrix, we have to examine the applicability of provisions of section 28(iv) read with section 2(24)(ix) of the Act. Incidentally the applicability of provisions of section 56 of the Act should also be examined as it was vehemently argued by the ld DR. At the outset, we find that originally the monies were received from Mr Feroz Patel, staying in Canada, as his share of capital in the assessee company. It is not in dispute that Mr Feroz Patel is the brother of Mr Yusuf Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut consideration or for inadequate consideration. In the instant case, the assessee company had only received monies. Hence the said provisions are also not applicable in the instant case. We find that the provisions of section 56(2)(viib) of the Act are applicable only for consideration for issue of shares received by a company from any person who is a resident. Admittedly, the monies have been received in the instant case by the assessee company from a non-resident. Hence the provisions of section 56(2)(viib) of the Act are also not applicable in the instant case. With regard to applicability of provisions of section 28(iv) of the Act, admittedly, the monies were not received by the assessee company in the ordinary course of its business. For the applicability of provisions of section 28(iv) of the Act, the following conditions should be satisfied :- (i) the assessee company should have carried on any business during the previous year; (ii) There should be a benefit arising to the assessee company; (iii) Such benefit must be one arising from the business carried on by the assessee company ; and (iv) Such benefit, if any, must be revenue in character i.e must be of income in n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id assessment order. * In the meantime, the Assessing Officer served a notice of demand. * The assessee filed appeal against the said assessment order. * The Commissioner (Appeals) after hearing the assessee disposed of the stay application and directed the assessee to pay 25 per cent of the demand in four equal monthly instalments and directed for the stay on the recovery of the balance amount. * On writ, the assessee prayed to set aside the order of Commissioner (Appeals). HELD * The Assessing Officer in the assessment order held that the transfer agreement is purely in the nature of 'transfer' as it does not mention the word 'gift'. He rejected the contention that the transfer of the shares was by way of gift as the agreement is titled as 'Transfer Agreement'. He observed that if it had been a gift 'it would have been a gift deed'. [Para 5] * The assessee has more than just a strong prima facie case in this regard. The title given to a document is not determinative of its true character. The purport of the document must be ascertained on a consideration of the contents thereof. The respondents do not deny that no consideration in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l had held that simply because both the donor and the donee happened to belong to the same group cannot ipso facto establish that they have any business dealings and it is a case of a valid gift which is to be treated as capital receipt in the hands of the assessee, in the absence of any specific provision taxing a Gift as a deemed business income, provisions of section 28(iv) cannot be applied on the facts of the case. In view of the judgment of the Tribunal, the assessee has more than just a strong prima facie case for a stay. * Prior to the transfer of the said shares the assessee held 1.59 per cent and 1.44 per cent of the equity shares of UPL & UEL respectively. After the transfer the assessee holds 21.35 per cent and 47.88 percent of the equity shares in UPL & UEL. A refusal to grant a stay would in all probability entail a sale of the said shares to meet the demand. Upon a sale of the shares, the Shroff group would loose a substantial benefit of such a large shareholding in both the companies. The Shroff group always held the shares. They transferred the shares to the assessee only for administrative convenience. If the assessee succeeds, ultimately the damage caused by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
