COMMISSIONER OF INCOME TAX-II vs. GAY LORD INDUSTRIES LTD

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TAXAP/1426/2011HC GujaratGJHC24025774201127 June 2012Bench: HONOURABLE MR. JUSTICE VIJAY MANOHAR SAHAI,HONOURABLE MR. JUSTICE N.V.ANJARIA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that neither of the two proposed questions of law raised a substantial question of law. Regarding the first issue, the Tribunal's deletion of the Rs. 95,22,350/- addition was based on the principle laid down in CIT v. Lovely Exports Pvt.Ltd., which states that once the identity of the shareholder is established, no addition can be made to the company's income for share application money. The Revenue was free to initiate proceedings against the investors. The Court found this to be a concluded finding of fact. Concerning the second issue, the Tribunal had affirmed the finding of the CIT(Appeals) regarding the deletion of the Rs. 5,01,200/- unsecured loans. The Court found that this was also a concluded finding of fact. Consequently, the Tax Appeal was dismissed as it was devoid of any merits and did not raise substantial questions of law.

What were the facts?

This case involves an appeal by the Commissioner of Income Tax-II (the Revenue) against an order of the Income Tax Appellate Tribunal (the Tribunal). The assessment year(s) are not explicitly stated. The appeal challenges the Tribunal's deletion of two additions made by the Assessing Officer: Rs. 95,22,350/- concerning an increase in share capital, and Rs. 5,01,200/- representing unsecured loans from M/s. Sharthak Securities Ltd. and M/s. Ama Finvest Pvt.Ltd. The High Court of Gujarat is hearing the appeal.

What were the issues?

The High Court was asked to decide two proposed questions of law: 1. Whether the Tribunal was right in law and on facts in deleting the addition of Rs. 95,22,350/- in respect of an increase in share capital? 2. Whether the Tribunal was right in law and on facts in deleting the addition of Rs. 5,01,200/- made under Section 68 of the Income Tax Act, 1961, being unsecured loans from M/s. Sharthak Securities Ltd. and M/s. Ama Finvest Pvt.Ltd.? The Revenue argued that the Tribunal erred in deleting these additions. The Assessee's arguments are not recorded in the judgment. The Tribunal's decision on the first issue relied on the precedent set in CIT v. Lovely Exports Pvt.Ltd. (2011) 216 CTR 195, which states that if the identity of the shareholder is established, no addition can be made to the company's income for share application money received, and proceedings can be initiated against the investors. For the second issue, the Tribunal affirmed the findings of the CIT(Appeals).

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

TAXAP/1426/2011 1/3 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 1426 of 2011 For Approval and Signature: HONOURABLE MR.JUSTICE V. M. SAHAI HONOURABLE MR.JUSTICE N.V. ANJARIA ========================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================= COMMISSIONER OF INCOME TAX-II - Appellant(s) Versus GAY LORD INDUSTRIES LTD - Opponent(s) ========================================= Appearance : Mr.M.R.Bhatt, Senior counsel with MRS MAUNA M BHATT for the Appellant. ========================================= CORAM : HONOURABLE MR.JUSTICE V. M. SAHAI and HONOURABLE MR.JUSTICE N.V. ANJARIA Date : 27/06/2012

TAXAP/1426/2011 2/3 JUDGMENT ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE V. M. SAHAI) 1. We have heard Mr.M.R.Bhatt, learned Senior counsel appearing for the revenue on the following proposed questions of law. 1. Whether the Tribunal is right in law and on facts in deleting the addition of Rs. 95,22,350/- in respect of increase in share capital ? 2. Whether the Tribunal is right in law and on facts in deleting the addition of Rs. 5,01,200/- made under section 68 of the Actg being unsecured loan from M/s. Sharthak Securities Ltd. and M/s. Ama Finvest Pvt.Ltd. ? 2. So fas the question about deletion of addition of Rs. 95,22,350/- in respect of increase in share capital is concerned, the Tribunal has recorded a finding against the department in CIT v.Lovely Exports Pvt.Ltd. reported in216 CTR 195 in which it has been held that if the identity of shareholder is brought on record, then no addition can be made in the hands of the company who has received the share application money and the revenue is free to initiate proceedings against investors. Therefore, question no.1 does not raise any substantial question of law. 3. So far as the second proposed question no.2 is concerned, the Tribunal has affirmed the finding recorded by the CIT(Appeals) which has been extracted in para-7 of the order of the Tribunal. 4. In view of the finding of CIT(Appeals) which has been affirmed by the Tribunal, we find that this Appeal has concluded finding of fact. Both the questions proposed by the revenue are

TAXAP/1426/2011 3/3 JUDGMENT concluded by finding of fact. They do not raise any substantial question of law. This Tax Appeal is devoid of any merits and is accordingly dismissed. (V.M.SAHAI,J) (N.V.ANJARIA,J) ***vcdarji

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