DCIT 1(1)(2), MUMBAI vs. GOLDMAN SACHS INDIA P.LTD, MUMBAI

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ITA 730/MUM/2016Status: DisposedITAT Mumbai15 October 2019AY 2009-107 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the CIT(A) correctly deleted the addition of share premium as taxable income. The Tribunal relied on CBDT instructions and High Court/ITAT decisions which treat share premium as a capital account transaction not giving rise to income.

What were the facts?

The assessee company received a substantial amount as share premium. The Assessing Officer treated this share premium as income under Section 56(1) of the Income Tax Act, 1961. The CIT(A) deleted this addition, holding it to be a capital receipt.

What were the issues?

Whether share premium received by a company is taxable as income, and if the CIT(A) was justified in deleting such an addition.

Which sections of the Income-tax Act were involved?

Section 56(1),Section 68

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI

Before: SHRI RAJESH KUMAR, AM & SHRI AMARJIT SINGH, JM

Hearing: 18/07/2019Pronounced: 15/10/2019

O R D E R

PER AMARJIT SINGH, JM:

1.

The revenue has filed the present appeal against the order dated 30.11.2015 passed by the Commissioner of Income Tax (Appeals) -2, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2009- 10.

2.

The revenue has raised the following grounds: - "1. "Whether on the facts and in the circumstances of the case and in law, the CIT(A) was justified in deleting the addition of share premium received on the ground that it was a capital receipt whereas in reality there is accretion to assets without a corresponding increase in liability thereby determining the nature of receipt of share premium as income A.Y.2009-10 leading to rise in assets on the one hand and reserves, which are own funds of the company, on the other hand?" 2. " Whether on facts and in the circumstances of the case and in Law, the CIT(A) was justified in deleting addition to income on account of share premium without appreciating that there is no justification for premium amount received and therefore, the phrase "nature" occurring in section 68 of the Act is attracted to the facts of the case." 3. " Whether on facts and in the circumstances of the case and in Law, the CIT(A) ought to have confirmed the addition made to income on account of share premium received without there being adequate justification. 4. " Whether on facts and in the circumstances of the case and in Law, without prejudice to Question No.1 and 2 above the CIT(A) ought to have held that share premium is a revenue receipt taxable under the Act being accretion to assets without corresponding increase in liability and the corresponding reserves generated can be distributed as dividend in the form of bonus / shares. " The appellant craves leave to add to, amend or withdraw the aforesaid ground of appeal

.”

3. The brief facts of the case are that the assessee filed its return of income on 29.09.2009 declaring total income to the tune of Rs.5,72,06,030/-. The assessment was completed u/s 143(3) by assessing the income to the tune of Rs.7,47,82,70/- on 16.12.2011. Thereafter, the assessee filed an appeal before the CIT(A) who granted the relief to the assessee. While giving effect to the CIT(A) order, the AO passed the order dated 22.08.2013 determining the income to the tune of Rs.5,72,29,977/-. Thereafter, the case of the assessee was reopened u/s 148 of the Act on the ground that the assessee received high amount of share premium during the year. The assessee filed the reply dated 11.04.2014. Thereafter, notice u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. The assessee company received the share premium in sum of Rs.398,13,93,000/- The assessee has given loan and advances to the tune of 2 A.Y.2009-10 Rs.47.98 crores and also made the investment in shares and securities. The balance amount of Rs.407 crores was shown as cash in hand in the bank account. The share capital of the assessee was increased from 21 lakhs in the previous year to 84.44 crores. The AO was of the view that an amount of Rs.398,13,93,000/- was chargeable to tax as per Section 56(1) of the Act and accordingly taxed. The total income of the assessee was assessed to the tune of Rs.403,86,22,977/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who allowed the claim of the assessee, therefore, the revenue has filed the present appeal before us.

ISSUE NOS. 1 to 4:- 4. All the issues are in connection with the deletion of addition of Rs.398,13,93,000/- of share premium. The Ld. Representative of the Revenue has argued that the premium amount was very high and share premium amount were not utilized properly as per Section 78 of the companies Act and introduction of fresh capital at a premium amounting to Rs.398,13,93,000/- partake the character u/s 56 of the I. T. Act, therefore, the said amount is liable to be added to the income of the assessee in accordance with law. It is also argued that the share premium seems to be transferred of the funds to the company which was not having high value, therefore, the finding of the CIT(A) is not justifiable, hence, is liable to be set aside. However, on the other hand, the Ld. Representative of the assessee has strongly relied upon the order passed by the CIT(A) in question. Before going further, we deem it necessary to advert the finding of the CIT(A) on record: -

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