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TMI Blog2023 (5) TMI 1412X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, the share application money was received in A.Y. 2011-12 and allotted in the A.Y. 2015-16. During the intervening period, the assessee had every right to get their monies refunded and opt out of the share allotment process. Hence, it would be only logical when the share allotment has been finalized, the subscriber gets allotted the shares, the provisions of Section 56(2)(viib) needs to be invoked. A taxing provision cannot be invoked even before the completion of a transaction fully and finally. We are in agreement with the judgment of ITAT in case of [ 2019 (2) TMI 1470 - ITAT DELHI] had held that share allotment date, not share application, is relevant date to trigger provisions of Section 56(2)(viib). Whether the AO can change ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT(A) has erred in deleting the addition of Rs. 1,63,35,000/- made by AO on account of excessive share premium u/s 56(2)(viib) of the Income Tax Act, 1961. 2. Whether on the facts and in the circumstances of the case, the ld. CIT(A) has failed to appreciate that provisions of Section 57(2)(viib) of the Income Tax Act, 1961 are applicable in the year in which are allotted at a premium and not in the year in which the share application money was received. 3. The assessee company is engaged in the business of construction activities. The assessee filed return of income on 26.09.2015 declaring an income of Rs. Nil. During the year, the assessee company has allotted 16,5110 optionally convertible preference shares having face value of Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rulings of various benches. Section 56(2)(viib) has been inserted vide Finance Act, 2012 w.e.f. 01.04.2013 to provide that, where a closely held company receives in any previous year from any person being a resident, any consideration for issue of share that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares, will be charged to tax in the hands of the recipient company as income from other sources. 9. After a subscriber entity advances amount for allotment of shares, the subscriber entity has every right to withdraw or cancel its request for allotment. Earlier, under old Companies Act regime, many companies accepted share application money under priv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate, not share application, is relevant date to trigger provisions of Section 56(2)(viib). 10. With regard to the Second issue, we find that the assessee has filed a valuation report dated 20.03.2015 under Rule 11UA from an authorized valuer who valued the shares at Rs. 1000/- per share as per Annexure B of the report. The valuer while determining the value of the optionally convertible preference shares as per the standards on related services (SRS) 4400. 11. The methodology used is as under: Present Scenario OCPS = FV @10/- + premium @ 990/- = 1000/- Equity = 1 Equity Share = FV @ 10/- each. Conversion basis 1 OCPS = 100 Equity Shares Thus, 1 OCPS, @ 1000/- = 100 Equity Shares @ 10/- per equity share. 12. Thus, it can be found that the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purposes of this clause, (a) the fair market value of the shares shall be the value (i) as may be determined in accordance with such method as may be prescribed; or (ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, whichever is higher; (b) venture capital company , venture capital fund and venture capital undertaking shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of Explanation to clause (23FB) of section 10; 15. From ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re such dividends have not been declared before the date of transfer at a general body meeting of the company; (iii) reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation; (iv) any amount representing provision for taxation, other than amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto; (v) any amount representing provisions made for meeting liabilities, other than ascertained liabilities; (vi) any amount representing continge ..... X X X X Extracts X X X X X X X X Extracts X X X X
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