RAMANI HOTELS LTD/RAMEE GUESTLINE HOTEL,JUHU MUMBAI vs. ASST COMMISSIONER OF INCOME TAX CIRCLE 11 1 1 MUMBAI , MUMBAI

per share from Ramee Investments Ltd. (non-resident company). However, as per

the valuation reports, the value of the shares was much lesser than the premium

received by it. The value nearest to the date of issue was Rs.589.20 per share.

ITA No.1609/MUM/2026 Ramani Hotels Ltd. Ramee Guestline Hotel Therefore, there was difference of Rs.160.80 per share. Since the assessee had

received share premium on 88,815 shares, the difference of Rs.1,42,81,452/-

(160.80 x 88,815) was added u/s 68 of the Act.

The assessee submitted that the identity and creditworthiness of the investor is

established beyond doubt because the parent company of the assessee i.e.

Ramee Investments Ltd., a non-resident company, has made the investment and

the transaction was through banking channels. The CIT(A) observed that the

establishment of identity and creditworthiness is not enough and the

genuineness of the transaction and the nature of the credit must also be

satisfactorily explained. The assessee's own valuation report showed declining

fair value of shares, yet the shares were issued at a substantially higher premium

without any material justification, negotiation records, or evidence of business

prudence. The CIT(A) referred to the decisions in cases of (i) PCIT v. NRA Iron &

Steel Pvt. Ltd. (2019) 412 ITR 161 (SC) and (ii) Major Metals Ltd. v Union of India

(2012) 207 Taxman 185 (Bom) and CIT vs. P. Mohanakala 291 ITR 278 (SC). The

CIT(A) held that premium charge is far in excess of fair value and the assessee has

not furnished any evidence to justify such premium. Hence, he upheld the

addition made by the AO u/s 68 of the Act.

Tribunal. The Ld. AR has filed a paper book giving various details regarding the 3

ITA No.1609/MUM/2026 Ramani Hotels Ltd. Ramee Guestline Hotel allotment of shares at a premium of Rs.750 per share. The Ld. AR submitted that

provisions of section 68 are not applicable in the instant case. He submitted that

amount of share premium was received from its parent company, Ramee

Investments Ltd., a NRI company. The addition is made only of the difference

between the actual premium amount and the value as per the valuation report.

The premium to the extent of the valuation report is unquestioned and

undisputed. It is submitted that addition of difference between the issue price of

shares and its fair market value (FMV), is not contemplated in section 68 of the

Act.

6.1 The Ld. AR also submitted that the power to refer to valuation is stated in

section 142A of the Act and it does not make reference to section 68 of the Act.

Hence, no valuation of any kind is contemplated in the scheme of section 68 of

the Act. He relied upon the decision of ITAT, Mumbai in case of Chiripal Poly Films

Ltd. [2019] 104 Taxmann.com 172 (Mum-Trib). He also submitted that the

addition of difference between the issue price and FMV (as per valuation report)

is contemplated in section 56(2)(viib) of the Act. If the same addition can be made

u/s 68 of the Act or any other section, then section 56 (2)(viib) of the Act would

become otiose, as held in Chiripal Poly Films Ltd. (supra).

6.2 The Ld. AR further submitted that premium was received from a non-

resident person. Section 56(2)(viib) of the Act, as applicable to the year under

consideration (2016-17), does not apply where amount is received from person 4

ITA No.1609/MUM/2026 Ramani Hotels Ltd. Ramee Guestline Hotel resident outside India. The words 'being a resident' were deleted from section 56

(2)(viib) of the Act w.e.f Α.Υ. 2024-25. He submitted that if what is exempt u/s.

56(2)(viib) is to be brought to tax u/s. 68, then the exemption to

receipts/investments from non-resident persons given by section 56(2)(viib) of

the Act, would be rendered meaningless and ineffective. The Ld. AR relied on the

following decisions: (i) Chiripal Poly Films Ltd. [2019] 104 Taxmann.com 172

(Mum-Trib), (ii) Singhal General Traders ITA/4197/Mum/2017 dated 24.02.2020

and (iii) Confiance Trading Pvt. Ltd. ITA/199/Mum/2020 dated 24.01.2022.

He submitted that the AO has added only the excess amount of share premium

over and above the value as per the valuation report.

also carefully perused the decisions relied upon by the both sides. The undisputed

facts in the instant appeal are that the assessee received the impugned share

capital and share premium from its NRI parent company, M/s Ramee Investments

Ltd. The AO has neither added the share capital nor the share premium to the

extent of the valuation report. Only the amount over and above the valuation

report, being Rs 160.80 (750.00 (-) 589.20) per share, was added u/s 68 of the Act.

The Ld. AR submitted that such an addition is not permissible u/s 68 of the Act.

The same is also not liable to be added u/s 56(2)(viib) of the Act because the

words “being a resident” were deleted from section 56(2)(viib) of the Act w.e.f. 5

ITA No.1609/MUM/2026 Ramani Hotels Ltd. Ramee Guestline Hotel AY 2024-25. Since the year under consideration is AY 2016-17, the amount could

not be added u/s 56(2)(viib) of the Act. The Ld. AR has relied on the decision of

the co-ordinate Bench in case of Chiripal Poly Films Ltd. (supra). We have gone

through the said order of the co-ordinate Bench of the Tribunal. The relevant part

of the decision is as under:

“17. In view of the aforesaid, we are of the view that valuation is not relevant for determining genuineness of the transaction for the purpose of section 68 of the Act. We are of the view that CIT(A) has rightly deleted the addition on account of the share premium relying on the decision of Hon'ble Jurisdictional tribunal in case of Green Infra Ltd. (supra). It is a settled position that what is apparent is real unless proved otherwise. It is a settled legal position that "apparent is real" and the onus to prove that the apparent is not the real is on the party who claims it to be so as held by Hon'ble Supreme Court in case of CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349. 18. In the present case, the overwhelming evidence proves that the 'nature' of receipt is share premium and share application money. The audited accounts of both parties, the statutory since it was the department which claimed that the share premium is not in fact so, despite the statutory forms viz. Form 2 for return of allotment and Form 20B for annual return filed with the ROC all show the 'nature' as share premium. If the Department wants to contend that what is apparent is not real, it is the onus of the department to prove that it was Assessee's own money which was routed through a third party. Only then can the provisions of section 68 of the Act be invoked. This aspect is considered in the decision of Mumbai Tribunal in case of Green Infra Ltd. v. ITO [2013] 145 ITD 240/38 taxmann.com 253, wherein Tribunal has held that it is a prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of the shareholders whether they want to subscribe to such a heavy premium. The Revenue authorities cannot question the charging of such of huge premium without any bar from any legislated law of the land. The said decision has been affirmed by Hon'ble Jurisdictional high Court in case of Green Infra Ltd (Supra). 19. The Ld. Counsel for the assessee made another argument that the power of carrying valuation is not envisaged by the Legislature for the purpose of Section 68 of the Act. He argued that, wherever the Legislature intended to give the power to determine the value to the AO, it either prescribes Rule for valuation of a particular thing or vested upon the AO the power to refer to the Valuation officer. The power of AO to make a reference to the Valuation Officer is contained in section 142A of the Act. Section 142A of the Act as it stood for the year under consideration reads as under: "142. (1) For the purposes of making an assessment or reassessment under this Act, where an estimate of the value of any investment referred to in section 69 or section 6911 or the value of any bullion, jewellery or oilier valuable article referred to in section 6

ITA No.1609/MUM/2026 Ramani Hotels Ltd. Ramee Guestline Hotel 69A or section 6911 or fair market value of any property referred to in sub-section (2) of section 56 is required to be made, the Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to him". 20. We have considered the issue and find that this section does not cover section 68 of the Act. Thus, the Legislature does not envisage any sort of valuation for the purpose of section 68 of the Act. Indeed, valuation of preference shares is a completely different exercise as compared to valuation of equity shares. The AO makes the mention of the reserves and loss while challenging the charge of share premium on preference shares. "Reserves" could be relevant for valuing equity shares. They are not relevant for valuing preference shares. Preference shareholders get priority over the equity shareholders in terms of payment of dividend and during winding up. They get only a fixed rate of dividend. The redemption amount depends on the terms of issue. The conversion depends on the terms of issue. The terms of issue are relevant for valuing preference shares. Even the present Rule 11UA of the Income Tax Rules 1962 are applicable only to section 56(2) of the Act, requires valuation of preference shares by the merchant bankers. The AO has not even attempted to do any sort of valuation of preference shares. His addition is based entirely on conjectures and surmises. It is settled law that the assessment cannot he made on mere suspicion, conjectures and surmises. 21. Even amendment to section 68 brought by Finance Act, 2012 does not refer to valuation. The insertion of the proviso to section 68 of the Act by Finance Act, 2012 casts an additional onus on the closely held companies to prove source in the shareholders subscribing to the shares of companies. During the course of the hearing, the Ld Counsel explained that the explanatory memorandum to the Finance Bill 2012 makes it clear that the additional onus is only with respect to source of funds in the hands of the shareholders before the transaction can be accepted as a genuine one. Even the amended section does not envisage the valuation of share premium. This is further evident from a parallel amendment in section 56(2) of the Act which brings in its ambit so much of the share premium as charged by a company, not being a company in which the public are substantially interested, as it exceeds the fair market value of the shares. If one accepts the Ld CIT-DR's contentions that section 68 of the Act can he applied where the transaction is proved to be that of a share allotment that here the valuation for charging premium is not justified, it will make the provisions of section 56(2)(viib) of the Act redundant and nugatory. This cannot be the intention of the Legislature especially when the amendments in the two sections are brought in at the same time. 22. In view of the matter, the Ld Counsel explained that it is a settled law that where two views are possible, the view favorable to the assessee should be adopted as held by Hon'ble Supreme Court in case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192. In view of the above facts and circumstances, we are of the view that the assessee has discharged its onus by adequately disclosing the transaction in its books of accounts, filing statutory forms as regards allotment of shares, providing name, address and PAN of the shareholders, etc. the assessee has sufficiently discharged the onus cast upon it for the purpose of section 68 of the Act and no addition can be made on this account. Hence, we are of the view that the CIT(A) has rightly deleted the addition and we confirm the same. These two common issues of Revenue's appeal are dismissed.” 7

ITA No.1609/MUM/2026 Ramani Hotels Ltd. Ramee Guestline Hotel 8.1 The facts of the case are similar to the facts of the above case. The Ld. Sr.

AR has not been able to distinguish the above decision either on facts or on law.

Hence, following the above decision of the co-ordinate Bench of the Tribunal, the

addition u/s 68 of the Act is not liable to be sustained. Accordingly, the ground is

allowed.

Order is pronounced on 13.07.2026.

Sd/- Sd/- (SANDEEP GOSAIN) (BIJYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER

*Aniket Chand; Sr. PS MUMBAI Date: 13.07.2026 Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, MUMBAI 6. Guard File

By Order

Assistant Registrar ITAT, MUMBAI