PHASORZ TECHNOLOGIES P LTD,BANGLORE vs. ITO CORPORATE WARD-5(1), CHENNAI

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ITA 2763/CHNY/2019Status: DisposedITAT Chennai16 January 2020AY 2015-163 pages

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

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that as per CBDT circular, Section 56(2)(viib) is not applicable to recognized start-ups that have filed Form 2. Therefore, the addition made by the Assessing Officer was not justified.

What were the facts?

The assessee's appeal was filed against an order for AY 2015-16. The assessee did not appear, and the postal authorities returned the hearing notice with an endorsement 'No such company'. The Departmental Representative submitted that the assessee is a recognized start-up.

What were the issues?

Whether the provisions of Section 56(2)(viib) are applicable to a recognized start-up company for the valuation of shares.

Which sections of the Income-tax Act were involved?

Section 56(2)(viib)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI N.R.S. GANESAN & SHRI RAMIT KOCHAR

For Respondent: Shri A. Sundararajan,Addl. CIT
Hearing: 05.12.2019Pronounced: 16.01.2020

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

1.

This appeal of the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals)–3, Chennai dated 17.07.2017 and pertains to the assessment year 2015-16.

2.

The notice of hearing was issued by this Tribunal by RPAD. However the postal authorities returned the RPAD with an endorsement ‘No such company’. There may be various reasons for the assessee for not furnishing the correct address to the registry. This Tribunal has no machinery to trace out the assessee and serve notice. Therefore, we heard the Ld. Departmental Representative and proceeded to dispose the appeal on merit.

3.

Shri A. Sundararajan, the Ld. Departmental Representative submitted that the assessee is a recognized start-up company and filed copy of Form 2. The CBDT issued a circular on 09.08.2019 clarifying that there cannot be any addition with regard to valuation of shares U/s.56(2)(viib) of the Income Tax Act. In view of this circular, according to the Ld.DR the Department cannot enforce the outstanding demand. Hence, the appeal has to be allowed.

4.

Having heard the Ld.DR, we find that the CBDT by circular dated 30.08.2019, the copy of which is available on record made it clear that when the assessee is a recognized start-up company having filed declaration in Form 2, the provisions of Section 56(2)(viib) shall not be made applicable. In view of this circular, this Tribunal is of the considered opinion both the authorities below are not justified in making any addition. Accordingly the orders of both the authorities below are set aside and the addition made by the Assessing Officer is deleted.

5.

In the result, the appeal filed by the assessee stands allowed.

Order pronounced in the court on 16th January, 2020 at Chennai.

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