Unraveling the Maze of Round-Tripping: The Doctrine of "Source of Source" in Share Capital Transactions

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..... ing the issue of creditworthiness and genuineness of share capital transactions u/s 68 of the Income Tax Act, 1961. The case involved an assessee company that received substantial share application money from various investor companies, and the revenue authorities questioned the genuineness of these transactions. Arguments Presented The assessee contended that the transactions were genuine, as t .....

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..... of Income Tax Versus NR Portfolio Pvt. Ltd. - 2013 (11) TMI 1381 - DELHI HIGH COURT and Principal Commissioner of Income Tax (Central) - 1 Versus NRA Iron & Steel Pvt. Ltd. - 2019 (3) TMI 323 - Supreme Court, which held that the creditworthiness or genuineness of a transaction depends on various factors, such as the relationship between the parties, the mode of approach, the quantum of money invo .....

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..... panies were closely related to the director of the assessee company, and in one case, the assessee's director was himself a director in one of the investor companies. This raised doubts about the creditworthiness and genuineness of the transactions. The court also observed that the investor companies had purchased shares at a high premium without any business operations or earnings to justify .....

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..... stors had the requisite creditworthiness and whether the transactions were genuine. The court upheld the CIT(A)'s order and set aside the Tribunal's order, answering the substantial questions of law in favor of the revenue authorities. Doctrine or Principle Discussed The court discussed and applied the doctrine of "source of source" or "origin of origin" in this case .....

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..... ns and "round-tripping" of funds among the group companies, raising doubts about the creditworthiness and genuineness of the transactions. Applying the doctrine of "source of source" or "origin of origin," the court concluded that the transactions were part of a premeditated plan to introduce unaccounted money into the assessee company through a circular rotation of .....

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