9911796707
TMI Blog2022 (5) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... I 1263 - BOMBAY HIGH COURT] and Paradise Inland Shipping Pvt. Ltd. [ 2017 (3) TMI 1263 - BOMBAY HIGH COURT] and we hold that the said amendment to Section 68 cannot be said to be retrospective in nature and it has to be prospective i.e. from AY 2013-14. The judgements of the Hon ble Apex Court in the case of G. S. Homes Hotels Pvt. Ltd. [ 2016 (8) TMI 613 - SC ORDER] and case of Apeak Infotech [ 2017 (9) TMI 1590 - BOMBAY HIGH COURT] read with Vodafone India Services P. Ltd. [ 2014 (10) TMI 278 - BOMBAY HIGH COURT] are quite apt to the issue that share capital and share premium are on capital account and cannot be considered as income of the assessee. Accordingly, the addition as made by the Assessing Officer and confirmed by the CIT(A) deserves to be deleted and as such, we delete the addition made u/s. 68 - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... large share premium'. The AO noticed that the appellant company, during the year under consideration, increased its share capital by Rs. 2,58,00,000/- by way of share capital and share premium to five private companies and two individuals as under: Sr. No. Name Share capital Share premium Total 1 M/s Nachiketa Agrotech (P) Ltd. 2,02,000/- 98,98,000/- 1,01,00,000/- 2 M/s Domain Enterprises Pvt. Ltd. 38,000/- 18,62,000/- 19,00,000/- 3 M/s Legacy Mercantile Pvt. Ltd. 80,000/- 39,20,000/- 40,00,000/- 4 M/s Kabir Enterprises Pvt. Ltd. 1,14,000/- 55,86,000/- 57,00,000/- 5 Directy Mercantile Co. Pvt. Ltd. 80,000/- 39,20,000/- 40,00,000/- 6 Shri Akshay Bhardwaj 50,000/- --- 50,000/- 7 Shri Sanjay Kumar 50,000/- --- 50,000/- Total 6,14,000/- 2,51,86,000/- 2,58,00,000/- 5. In the assessment proceedings, the AO, not being satisfied about the identity and genuineness of the allottees of shares of the appellant company, deemed the share capital and premium of Rs. 2,58,00,000/- as income of the appellant company by invoking the provisions of section 68 vide order dated 27/03/2015 under section 143(3) of the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of assessment proceedings, the counsel of the assessee further argued that the Assessing Officer required the assessee to prove the identity, capacity and genuineness of the transactions as required u/s 68 of the Income Tax Act, 1961. The Assessing Officer also mentioned in the assessment order that as per the report of the 'Investigation Wing', the companies, who had subscribed towards Share Capital and Share Premium were not found to be in-existence. In compliance, during the course of assessment proceedings, submissions were made by the assessee, as per para 2.4 of the order of the Assessing Officer, giving the details of the PAN numbers of the assessee and audit reports of the respective companies and, besides, that certificate of incorporation with the Registrar of Companies, Memorandum of Association and Form No. 23AC as filed by the respective companies and no defects in such explanation had been pointed out by the Assessing Officer. 8. Again, the counsel stated that the Assessing Officer during the course of assessment proceedings made enquiries u/s 133(6) from the subscribers to the Share Capital/Share Premium and as per the para no. 2.7 of the order, it has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment Year 2013-14 and finally according to the Ld. CIT(A), higher onus is lies on such companies and further held in para 7 of the order, that this amendment to Section 68 has a retrospective application and that on the basis of preponderance of surrounding facts, the addition was confirmed, as made by the Assessing Officer u/s 68 of the Income Tax Act, 1961. 10. The Ld. Counsel of the assessee vehemently argued that the year under consideration is Assessment Year 2012-13 i.e. before the amendment to Section 68 and as per the settled law now, the amendment to Section 68 cannot be held to be retrospective and it has to be applicable only from the Assessment Year 2013-14 and, further, by relying upon the decision of the 'Vodafone India Services (P) Ltd.', reported in 368 ITR 1 (Bom.), wherein, it had been held that the amount received as Share Capital, including share premium are undoubtedly 'capital receipt' in the absence of express legislation. The Ld. Counsel further relied upon the decision of the Apex Court in the case of 'G. S. Homes and Hotels P. Ltd.', reported in 387 ITR 126, in which, it has been held that that Share Capital received from the various shareholders, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibers of such share applicants. 13. The Ld. Counsel again referred to page 106 of the above judgment of the Mumbai Bench, relevant para 18, wherein, it has been elaborately discussed about the relevant provisions of Section 56(viib) and it was held that Section 56(1) does not provide for charge to tax on capital transactions of issue of shares. It was further observed as under: "It was further observed that amendment to Section 2(24) and insertion of Section 56(2)(viib) w.e.f. 01.04.2013 relevant to AY 2013-14 and therefore, prior to insertion of Section 56(2)(viib), share premium cannot be charged to tax as it is in the nature of the capital receipt." 14. It has further been argued by the Ld. Counsel that in the said judgment, reliance have been placed on the judgment of the Hon'ble Apex Court in the case of 'G. S. Homes & Hotels (P) Ltd.' and 'Vodafone India Services (P) Ltd. (Supra)' and further held that the definition of income as provided u/s 2(24) of the Act at the relevant time did not define as income on account of consideration received for issue of shares in excess of the Fair Market Value, since the said amendment came into effect w.e.f. 01.04.2013 i.e. AY 2013-14 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 133(6) as per the evidences placed in the paper book and reproduced as above. The identity of the parties have been established and their PAN have also been provided and nothing adverse have been pointed out by the Assessing Officer/CIT(A). Even the existence of the parties have been proved by the voluminous documents submitted by such subscribers to the 'Registrar of Companies' like 'Certificate of Incorporation', 'Memorandum of Association', 'Form No. 23AC' and thus, identity of the subscribers to the Share Capital stands established. 19. We have gone through the judgments of the 'G. S. Homes & Hotels P. Ltd.' and of the Bombay High Court in the case of Apeak Infotech (Supra), and of the Vodafone India Services (P) Ltd. (supra) wherein, it has been held as under: "2. After hearing the learned counsels for the parties and perusing the relevant material, we modify the order of the High Court by holding that the amount (Rs. 45,84,000) on account of share capital received from the various share-holders ought not to have been treated as business income." Similarly in the case of 'Apeak Infotech', it has been held as under: "Section 4 of the Income Tax Act, 1961 - Income - Charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices Pvt Ltd vs UOI 308 ITR 1 (Bom) and after considering relevant provisions including the provisions of section 56(2)(viib) of the Act held that although section 56(1) of the Act would permit including within its head any income not otherwise excluded, it does not provide for a charge to tax on capital account transaction of issue of shares as is specifically provided for in section 45 or section 56(2)(viib) of the Act and included within the definition of "income" in section 2(24) of the Act. It was further observed that amendment to section 2(24) and insertion of section 56(2)(viib), share premium cannot be charged to tax as it is in the nature of capital receipt. This legal position is further reiterated by the Hon'ble Bombay High Court, Nagpur Bench in a series of tax appeals in Income-tax Appeals No. 26 to 31 of 2017 dated 08-06- 2017, where the Hon'ble High Court has considered the question of taxability of share premium in the light of its earlier decision in case of Vodafone India Services Pvt Ltd vs UOI (supra) and also considering the ratio of judgement of Hon'ble Apex Court in the case of G.S. Homes & Hotels Pvt Ltd vs DCIT in Civil Appeal No.7370 to 7380 of 2016 da ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
