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TMI Blog2022 (6) TMI 1340X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that in respect of ITA No.1998/Chny/2019, there was 2 days meager delay on account of non-availability of records and in respect of ITA No.723/Chny/2020 there was 127 days delay in filing of appeal, mainly due to lockdown imposed by the Govt. on account of spread of Covid-19 infections and in view of Hon'ble Supreme Court suo motu Writ Petition No.3 of 2020, if the period of delay is covered within the period specified in the order of the Apex Court , then same needs to be condoned in view of specific problem faced by the public on account of Covid-19 pandemic. 3. The learned AR, on the other hand, fairly agreed that delay may be condoned in the interest of justice. 4. Having heard both sides and considered reasons given by the learned DR, we find that the Hon'ble Supreme Court in suo motu Writ Petition No.3 of 2020, has extended limitation applicable to all proceedings in respect of courts and tribunals across the country on account of spread of Covid-19 infections w.e.f. 15.03.2020, till further orders and said general exemption has been extended from time to time. We further noted that delay noticed by the Registry pertains to the period of general exemption provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to be assessed as income from other sources." 6. Brief facts of the case are that the assessee is a private limited company carrying on business of manufacturing of salt and other industrial chemicals through conversion of naturally available brine by setting up composite marine chemicals plant. The cost of project is estimated at Rs.800 crores and assessee company has spent an amount of Rs.763.42 crores as at 31.03.2014. The assessee had filed its return of income for the assessment year 2014-15 on 12.02.2015 admitting total loss of Rs.43,37,54,020/-. During the course of assessment proceedings, the Assessing Officer has sought explanation regarding share premium of Rs.16,36,72,482/- received on allotment of equity shares of Rs.10/- per share with premium of Rs.99.21 per share. In response, the assessee submitted that the company had allotted 93,99,950 equity shares of Rs.10/- per share with premium of Rs.99.31 per share on 21.03.2011. As per terms of issue, an amount of Rs.7/- per share along with premium of Rs.68.90 per share has been received for the financial year 2010-11. During the financial year relevant to the assessment year 2014-15, the assessee company has rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the financial year 2010-11. The shares were allotted to the shareholders on 21.03.2011 at the face value of Rs.l0/- and the share premium of Rs. 99.21 at the time of allotment. The company received 70% of face value (Rs. 7/- and Share Premium (Rs. 68.90 i.e. 70% of 99.21) during the FY 2010-11 as per the company 's demand. During the FY 2013-14, the company received the balance consideration of face value of Rs. 1,66,99,850/- and share premium Rs. 16,36,72,485/- from the shareholders in proportion to the number of shares held by them. In the light of the above stated facts, we humbly submit that the provisions of Section 56(2)(viib) which has cone into force with effect from 01.04.2013 are not applicable in our case as the company has not issued any shares during the F.Y 2013-14. The shares were allotted during the F Y 2010-11. In other words the share premium received during the FY 13-14 pertains to the shares issued in 2010-11 when such provisions were not in the statute book." The above submissions of the assessee was carefully considered. As per provisions of section 56(2)(viib) of the Income Tax Act, 1961, which is reproduced below: "Where a company, not being a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09.21 per share. Further, the assessee has also substantiated price of shares under DCF method by considering future cash flows from operations, as per which equity share price had been worked out at Rs.109.21 per share at the time of allotment in March, 2011. It was further submitted that the assessee had also allotted 5.00 lakhs equity shares to a non-resident shareholder at issue price of Rs.450.10 per share, which includes premium of Rs.440.10 per share. Therefore, the assessee argued that the Assessing Officer has erred in invoking provisions of section 56(2)(viib) of the Act and taxed premium under the head 'income from other sources'. 9. The learned CIT(A), after considering relevant submissions of the assessee and also taken note of provisions of section 56(2)(viib) of the Act, opined that when the assessee had issued shares in financial year 2010-11 and received share premium, the Assessing Officer cannot invoke provisions of section 56(2)(viib) of the Act, when the assessee had received call money from shareholders in the financial year 2013-14, because when the shares has been allotted in the financial year 2010-11, provisions of section 56(2)(viib) of the Act, was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equity shares issued, subscribed and allotted towards face value was Rs.6,57,99,650/ - and towards securities premium was Rs.64,76,56,555/-. During the F.Y. 2013-14, the shareholders holding 53,99,950 equity shares have paid the amounts due towards face value of share amounting to Rs.1,61,99,850/- and towards share premium amounting to Rs.16,36,72,482/- to the appellant company. The appellant filed copy of Form No.2 filed with the ROC, Ministry of Corporate, Affairs indicating the allotment of 93,99,950 shares made on 21/3/2011. It also indicated that Rs.7/- out of Rs.10/- was received towards face value of shares and Rs.68.91 towards premium and the balance Rs.3/- was to be paid on calls towards face value and the balance of Rs.30.31 towards premium. The appellant stated that these details were already filed before the A.O. at the time of assessment proceedings. Thus, in effect the crucial date to be considered for invoking the provisions of section 56(2)(viib) is the date of allotment i .e 21/3/2011. Moreover, it is apparent that no shares had been issued by the appellant during the relevant previous year i.e. FY. 2013-14. Hence, the provisions of section 56(2)(viib) cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace value, aggregate consideration received for such shares as exceeds fair market value of shares is liable to be assessed under the head 'income from other sources'. The learned CIT(A) without appreciating above facts deleted additions made by the Assessing Officer and hence, order of the Assessing Officer should be upheld. 11. The learned A.R for the assessee, on the other hand, submitted that the Assessing Officer has erred in making additions towards share premium u/s.56(2)(viib) of the Act, without appreciating fact that when the shares were allotted in financial year 2010-11, provisions of section 56(2)(viib) of the Act was not there in statute book. The learned A.R for the assessee further submitted that the assessee had allotted shares in the financial year 2010-11 and has filed necessary return of allotment in Form No.2 with Registrar of Companies and proved that allotment has been completed in the financial year 2010-11. Further, although the assessee had received 70% of consideration in the year of allotment, but such arrangement between the assessee and its shareholders is in terms of provisions of the Companies Act, 1956, as per which the assessee can allot equity sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant to assessment year 2014-15 towards share premium amounting to Rs.16,36,72,482/-. The Assessing Officer had assessed security premium under section 56(2)(viib) of the Act for impugned assessment year on the ground that as per provisions of section 56(2)(viib) of the Act, where a company, not being a company in which public are substantially interested, receives, in any previous year from any person being resident, any consideration for issue of shares that exceeds face value of such shares, aggregate consideration received for such shares as exceeds fair market value of shares is income of the assessee. According to the Assessing Officer, if the assessee receives any consideration in any previous year for issue of shares that exceeds face value of such shares, then aggregate consideration received for such shares in excess of fair market value of shares will be treated as income from other sources. Therefore, the Assessing Officer was of the opinion that when the assessee has received part securities premium for the impugned assessment year, the provisions of section 56(2)(viib) of the Act is very well applicable, when the assessee has received any consideration and thus, ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lotment of shares and balance can be collected on call. Therefore, in our considered view, when the assessee has allotted equity shares in the financial year 2010-11, allotment referred to under the Companies Act is complied with, because the assessee has filed necessary return of allotment with Registrar of Companies. Subsequent event of receipt of part consideration subsequent to date of allotment does not in any way change date of allotment. In other words, balance consideration payable by shareholders on allotment of equity shares becomes debt which can be collected at any time, as per terms of agreement between the parties, but for the purpose of reckoning date of allotment, it is important to consider date of allotment as considered by the parties, in terms of provisions of the Companies Act, 1956, by filing return of allotment in Form No.2 with the Registrar of Companies. In this case, as per details filed by the assessee, including return of allotment in Form no.2, allotment is completed in the financial year 2010-11, when the provisions of section 56(2)(viib) of the Act, was not in the statute book. Therefore, we are of the considered view that the Assessing Officer cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ket value of the shares in accordance with such method, as may be prescribed or as may be substantiated by the company to the satisfaction of the Assessing Officer. Rule 11UA is prescribed method of valuation of unquoted equity shares and as per said rules, the assessee at its option can choose either DCF method or net asset value method to determine value of shares of a company. From plain reading of Rule 11UA, it is very clear that option is given to the assessee to choose particular method for valuation of shares, either DCF method or net asset value method. Once an assessee chooses a particular method, the Assessing Officer cannot change method followed by the assessee for valuation of shares, however, he can very well examine correctness of method followed by the assessee and determine price of shares. In this case, the assessee has adopted DCF method for valuation of shares. The Assessing Officer has neither called for any details nor examined correctness of method followed by the assessee, but called upon the assessee to work out fair market value of the shares on the basis net asset value method and formed opinion that share price charged by the assessee for allotment of eq ..... X X X X Extracts X X X X X X X X Extracts X X X X
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