ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(4), PUNE vs. SANGHVI BEAUTY AND TECHNOLOGIES PRIVATE LIMITED , PUNE

ITA 2120/PUN/2024Status: DisposedITAT Pune04 November 2025AY 2021-2211 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that the CIT(A) had granted relief based on the assessee being a Venture Capital Undertaking and investments being made by a SEBI registered Alternate Investment Fund. However, the assessee's counsel fairly admitted that WEL is not a SEBI registered Alternate Investment Fund. The Tribunal found that the CIT(A)'s basis for relief was incorrect as it relied on the treatment of investment from Ascent Private Equity Trust, which is a SEBI registered fund, without considering that WEL is not. Therefore, the issue regarding the investment from WEL deserved to be restored to the file of the CIT(A) for fresh adjudication. The Tribunal also noted that the assessee had provided other details regarding WEL, including the source of investment and valuation by a Registered Valuer using the Discounted Cash Flow method. The grounds raised by the assessee in the Cross Objection, concerning the valuation report by a SEBI registered Merchant Banker, were also restored to the CIT(A) for fresh adjudication as they related to the same issue. Operative Direction: The appeal and cross-objection were allowed for statistical purposes, remitting the issue of investment from WEL to the CIT(A) for fresh adjudication.

What were the facts?

The Revenue appealed against an order of the CIT(A) which deleted an addition of Rs. 10,33,59,732/- made by the Assessing Officer (AO) under Section 56(2)(viib) of the Income Tax Act, 1961. The addition pertained to excess share premium received by the assessee, Sanghvi Beauty and Technologies Private Limited, from Wipro Enterprises Limited (WEL) during Assessment Year 2021-22. The AO had made additions under Sections 56(2)(viib) and 56(2)(x) totaling Rs. 56,58,60,902/- and Rs. 35,66,57,616/- respectively, after finding the assessee's justification for increased share valuation unsatisfactory. The CIT(A) had deleted major additions, and the Revenue's appeal focused solely on the deletion concerning WEL. The assessee's cross-objection also related to the valuation of shares.

What were the issues?

1. Whether the CIT(A) erred in deleting the addition of Rs. 10,33,59,732/- made on account of excess share premium received by the assessee from Wipro Enterprises Limited (WEL), considering that WEL is neither a venture capital undertaking nor a SEBI registered fund, thus making the first proviso of Section 56(2)(viib) inapplicable? Assessee's Contention: The shares were issued at a valuation rate calculated under the Discounted Cash Flow method by a certified authority, and WEL is a resident Limited Company. Revenue's Contention: The first proviso to Section 56(2)(viib) is not applicable because WEL is neither a venture capital undertaking nor a SEBI registered fund. 2. (Implicitly arising from the cross-objection) Whether the valuation report prepared by a SEBI registered independent Merchant Banker adequately substantiates the Fair Market Value of the shares issued. Assessee's Contention (in Cross Objection): The Valuation Report on the basis of which shares were issued at Fair Market Value was prepared by a SEBI registered independent Merchant Banker. Revenue's Contention: Not recorded.

Which sections of the Income-tax Act were involved?

Section 56(2)(viib),Section 56(2)(x),Section 143(3),Section 270A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCHES “B”, PUNE

Before: DR. MANISH BORAD & SHRI VINAY BHAMORE

PER DR. MANISH BORAD, ACCOUNTANT MEMBER :

The captioned appeal at the instance of Revenue and Cross Objection by the assessee are directed against the order dated 09.07.2024 framed by Ld.CIT(A), Pune-12 emanating out of Assessment Order dated 30.12.2022 passed u/s.143(3) of the Income Tax Act, 1961 (in short ‘the Act').

2.

ITA No.2120/PUN/2024 and CO No.08

The order continues below.

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