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Income Tax Appellate Tribunal, DELHI BENCH “G”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI B.R.R. KUMAR
per share and share premium at Rs. 990/- per share. He further submitted that the AO had made the addition of Rs. 1,21,17,750/- and has accepted the share capital and part share premium and while arriving to the said conclusion he held that the net asset value as per equity share of assessee was Rs. 30.58 per share and, therefore, balance sum was brought as income u/s. 68 of the Act. He further submitted that the AO has invoked provision to section 68 and section 56(2)(viia) and (viib) of the Act. But none of the provisions are applicable to the instant year and infact they are applicable only for the assessment year 2013-14. He further submitted that in identical situation the ITAT, Mumbai in the case of ACIT vs. Goldmohur Design & Apparel Park Ltd. Reported in 96 taxmann.com 375 has deleted the addition. He further submitted that Assessee also seek to rely upon various judgments viz. ACIT vs. Spectrum Coal and Power Ltd. 62 ITR (Trib)
184 (Del.); 54 CCH 0156 (Mum) DCIT vs. Varsity Education Management (P) Ltd.; dated 16.5.2019 DCIT vs. M/s Gladious Property & Inv. (P) Ltd.; 176 ITD 15 (Mum) dated 28.2.2019 M/s Jayneer INfrapower and Multiventures (P) Ltd. Vs. DCIT in which on identical situation the addition was deleted by the higher Courts. In view of above, it is submitted that the addition on account of part share premium u/s. 68 of the Act is not in accordance with law and therefore, the same may be deleted.
On the contrary, Ld. CIT(DR) has stated that the assessee issued shares of Rs. 10 at a premium of Rs. 990 and as per NAV, value of shares come to Rs. 30.58 and assesee failed to give any justification for issue of shares at such a premium. Therefore, the AO made the addition u/s. 68 of the Act on the ground that the genuineness of the transaction was not prove, he relied upon proviso to section 68. He further submitted that Ld. CIT(A) confirmed the addition after giving detailed finding in para 2.2 to 2.10 of the order by relying up the judgment in the case of CIT vs. Nova Promoters & Finlease (P) Ltd. (18 taxmann.com 217) of the Hon’ble Delhi High Court; CIT vs. Globus Securities & Finance (P) Ltd. (2014) 41 taxmann.com 465 (Delhi); ITO vs. SBS Properties and Finvest Pvt. Ltd. In ITA No. 2164/Del/2008. He further submitted that with regard to addition made u/s. 68 following decisions may be considered viz. PCIT vs. NRA Iron & Steel (P) Ltd. (2019) 103 taxmann.com 48 (SC); CIT vs. MAF Academy (P)
Ltd. (361 ITR 258); CIT vs. Navodaya Caste Pvt. Ltd. (2014) 367 ITR 306 (Delhi); Navodaya Castle Pvt. Ltd. Vs. CIT (2015) 56 taxmann.com 18 (SC); Pratham Telecom India Pvt. Ltd. Vs. DCIT 2018 TIOL 1983 HC-Mum-IT. He further submitted that with regard to section 56(2)(viib) following cases may be considered viz. Sunrise Academy of Medical Specialities Pvt. Ltd. Vs. ITO (2018) 96 taxmann.com 43 (Kerala); Sunrise Academy of Medical Specialities India Pvt. Ltd. Vs. ITO (2018) 94 taxmann.com 181 (Kerala) and Agro Portfoloio (P) Ltd. Vs. ITO (2018) 94 taxmann.com 112 (Delhi.) In view of above, he requested that the appeal of the assessee may be dismissed.
We have heard both the parties and perused the records especially the Written Submissions and the case laws cited therein submitted by both the parties. We note that the main issue involved in this appeal is relating to addition of Rs. 1,21,17,750/- made u/s. 68 of the Act and during this year assessee raised share application money of Rs. 1,25,00,000/- which is evident from page 7-9 of the Paper Book from four shares holders and the shares were allotted on 31.3.2012 which is evident from annual return at page no. 90-94 of the Paper Book. The aforesaid allotment was made by issuing shares at Rs. 10/- per share and share premium at Rs. 990/- per share. The AO had made the addition of Rs. 1,21,17,750/- and has accepted the share capital and part share premium and while arriving to the said conclusion he held that the net asset value as per equity share of assessee was Rs. 30.58 per share and, therefore, balance sum was brought as income u/s. 68 of the Act. We further note that AO had invoked provision to section 68 and section 56(2)(viia) and (viib) of the Act. But none of the provisions are applicable to the instant assessment year i.e. 2011-12 and infact they are applicable only for the assessment year 2013-
We further find that on exactly identical situation, the ITAT, Mumbai in the case of ACIT vs. Goldmohur Design & Apparel Park Ltd. Reported in 96 taxmann.com 375 has deleted the similar addition by observing as under:-
"3. The next ground raised by the Revenue pertains to deleting the addition made on account of alleged investment of share holders as income from disclosed sources. The crux of the argument is that it is not a case of bogus shares rather the allegations are with respect to excess share premium. It was pleaded that the source is not in doubt and the premium is mentioned in the agreement. Our attention was invited to page 43. 44, 47 and 66 of the paper book. It was contended that it is government owned company. On the other hand. the Ld. DR defended the addition made by the Ld. Assessing Officer by contending that the tests arc the same even for the government company. REliacen was placed upon the decision Precision Finance (P) Ltd. (supra), Vir Bhan and Sons (Supra)_ and CIT vs. Jansampark Advertising and Marketing (P) Ltd. (2015) 56 taxmann.com 286/231 Taxman 384/375 ITR 373 (Delhi)…..
3.3….
If the aforesaid factual matrix is analyzed, the net asset value of shares as on 31/0312008 comes to Rs. 33/- as the total asset is Rs. 19.30,70,518/-, whereas, the premium charged per share is Rs. 154.72, thus, the excess premium charged comes to Rs. 121.72 resulting into total excess premium comes to Rs. 34,89,10,380. However, we note that as per the provisions of section 56(2)(viib), where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration receive for such share as exceed the fair market value of such share was inserted by the Finance Act, 2012, w.e.f, 0l/04/2013 and the present assessment year before us is 2009-10, therefore, the amendment made in section 68 is prospective in nature. Our view find supports from the decision in the case of ACIT vs. Gagandeep Infrastructure (P) Ltd. (ITA Appeal No. 5784 (Mum) of 2011, dated 23.4.2014), wherein the fact are identical. The Hon’ble Bombay High Court in CIT vs. Gandeep Infrastructure (P) Ltd. (2017) 80 taxmann.com 271 /247 taxmann 245/394 ITR 680 (Bom) held as under:-
In the aforesaid case, the Hon'ble High Court held that the three essential tests while con tinning the section 68 laid down by the COUl1 namely the genuineness of the transaction, identity and the capacity of the investor have all been examined 8 by the impugned order of the Tribunal and on fact it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders. i.e. they are bogus. The Apex Court in a case in this context to the pre- amended section 68 has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income- tax Officer to proceed by reopening the assessment of such shareholder and assessing officer to tax in accordance with law. It does not entitle the revenue to add the same to the assessee's income as unexplained cash credit. Incidentally in the caseof Green Infra vs. ITO (2013) 38 taxman.com 253/145 ITD 240 (Mum. - Trib.), decided in favour of the assessee and this order was confirmed by Hon’ble High Court in CIT vs. Green Infra Ltd. (2017) 78 taxmann.com 340 392 lTR 7 (Born.). The ratio laid down In Pr. CIT vs. Apeak Infotech (2017) 88 taxmann.com 695/397 ITR 148 (Bombay) High Court) and Hon’ble Madras High Court in CIT vs. Pranav Foundations Ltd. (2014) 51 taxmann.com 198/2015 229 taxman 58 further supports the case of the assessee. Thus, we find no infirmity in the order of the Ld. CIT(A), thus this ground of the Revenue is also dismissed.”
5.1 We further note that the ITAT, Delhi in the case of AClT Vs. Spectrum Coal and Power Ltd. Has held as under:-
It may be also be noted here at A.O. has referred to provisions of Section 56(2)(viib) of the LT. Act in the assessment order but he did not make any addition against the assessee under this provision because ultimately the addition is made
under section 68 of the LT. Act. No ground of appeal have also been raised by the revenue for invoking the provisions of Section 56(2)(viib) of the LT. Act against the assessee. The Ld. CIT(A) also discussed this issue in the appellate order and correctly found that the said provision was notified by the CBDT vide notification dated 29.11.2012, the said provision would come into effect w.e.f. A.Y. 2013-2014 i.e., from 0l.04.2013 for dealing with share premium. Otherwise, there were no provision prior to it to govern share premium. The CBDT in its Circular No.2/15 dated 30.01.2015 accepted the decision of Bombay High Court in case of Vodafone India Services P. Ltd., (supra) in which it was held that "premium on share issue was on account of capital account transaction and does not give rise to income." Therefore, no infirmity have been pointed in the order of the Ld. CIT(A) with reference to provisions of section 56(ii)(viib) of the I.T. Act. The Ld. D.R. has also not pointed out as to which additional documents have been considered by the Ld. CIT(A) at appellate stage which were not submitted before A.O. at the assessment stage. In the absence of any substantial point to highlight as to which additional evidences have been considered at appellate stage, we do not find if there is any violation of Rule 46A of the LT. Rules in the matter. The decisions relied upon by Ld. D.R. would not support the case of the Revenue which are distinguishable on facts and in view of the fact that no enquiry have been conducted by the A.O. in this case to dispute the documentary evidence filed by the assessee. The Ld. ClT(A) discussed all case laws relied on by A.O. The material on record clearly support the explanation of assessee that not only in assessment year under appeal but in earlier years also, Mis. STL made investment in assessee company through banking channel supported by the documentary evidence. The Ld. ClT(A) on proper appreciation of the evidence before him, correctly deleted the addition. Therefore, no interference is required in the finding of fact recorded by the Ld. CIT(A). The Departmental appeal has no merit. Same is accordingly dismissed. In the result, Departmental Appeal is dismissed.
5.2 We further note that ITAT, Mumbai in the case of DCIT vs. Varsity Education Management (P) Ltd. 54 CCH 0156 (Mum) has observed as under:-
The amendment brought in sec.68 of the Act w.e.f. 1.4.2013 has been held to be applicable from AY 2013-14 onwards by Hon'ble Bombay High Court in the case of Gagandeep infrastructure P Ltd (supra). Even otherwise, the amendment will not apply to the assessee herein as the investor is a SEBI registered Venture Capital Fund. The amendment brought in sec. 2(24) and sec.56(2)(vii) of the Act relating to assessing of excess share premium as income, has been held to be applicable from A Y 2013-14 onwards as held by Hon'ble Bombay High Court in the case of Apeak Infotech (supra).We have seen that the AO himself has accepted the quantum of share premium in A Y 2014-15 and further the actual financial results have far exceeded the financial projections
iii) dated 16.5.2019 DCIT vs. MIs Gladious
` Property & Inv. (P) Ltd. (pages 240-260 of JPB)
Another aspect of this is that the provisions of Section 56(2)(viib) were applicable only with effect from 01/04/2013 and the same were not applicable during impugned A Y. iv) 176 lTD 15 (Mum) dated 28.2.2019 M/s Jayneer lnfrapower &
Multiventures (P). Ltd. vs. DCIT
Section 56(2)(viib) of the Act which seeks to tax amount received in excess of fair market value of shares only applies from Assessment Year 2013-14. Hence, Section 56(2)(viib) of the Act cannot be resorted to in the instant assessment year 2012-13 under consideration. Therefore, share premium is not chargeable to tax. Even if the share premium is excessive, the same cannot be taxed under the provisions of section 68 during the A.Y. 2012-13 under consideration, since the nature and source of the same stands fully explained. This contention is duly supported by the decision of the Mumbai Tribunal in the case of DCTT V s. Varsity Education Management Pvt. Ltd. [ITA 6991/Mum/2016]. Accordingly, we direct the Assessing Officer to delete the addition made on account of share premium received by the assessee amounting to Rs. 34,99,65,000/-.
We further note that the other judicial decisions relied upon by the representatives of both the sides have been duly considered. In our considered view, we do not find any parity in the facts of the decisions relied upon with the peculiar facts of the case in hand.
Keeping in view of the facts and circumstances of the case and respectfully following the aforesaid precedents including the ITAT, Mumbai decision in the case of ACIT vs. Goldmohur Design & Apparel Park Ltd. Reported in 96 taxmann.com 375 and the ITAT, Delhi Bench decision in the case of ACIT vs. Spectrum Coal and Power Ltd. in which various case laws of the Tribunal, as well as Hon’ble High Courts have been followed by the Tribunal, we are of the considered view that the addition in dispute on account of part share premium u/s. 68 of the Act which is not made in accordance with law and therefore, the same is hereby deleted.
In the result, the Appeal filed by the Assessee stands allowed.
Order pronounced in the Open Court on 12/07/2019.