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Income Tax Appellate Tribunal, DELHI BENCH “E”, NEW DELHI
The present appeal has been filed by revenue against order dated 20.01.2014 asked by Ld. CIT(A)-IX, New Delhi for assessment year 2008-09 on following grounds of appeal:
1. Whether on the facts and circumstances of the case & in law, the Ld. CIT (A) erred deleting the Short Term Capital Gain of Rs.8,30,94,577/- entirely on the submission of the assessee and completely ignoring the detail findings given by the A.O?
2. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in holding that the excess amount i.e. premium beyond the actual worth, of Rs. 8,30,94,577/- received by the assessee on account of sale of shares is not income from other sources?
3. Whether on the facts and circumstances of the case & in law, the Ld. CIT (A) erred in holding that the sale of shares of the Company is not a slump sale u/s SOB without appreciating the fact that the above transaction resulted in changing the substantial share holding of the company and thus it was correctly held as slump sale by the A.O?
4. Whether on the facts and circumstances of the case & in law, the Ld. CIT (A) erred in deleting the Short Term Capital Gain of Rs. 8,30,94,577/- made by the A.O u/s SOB by holding that the premium charged for changing the ownership of the company's share holding?
5. That the order of the Ld. CIT(A) is erroneous and is not tenable on facts and in law.
6. That the grounds of appeal are without prejudice to each other.
7. That the appellant craves leave to add, alter, amend or forgo any ground (s) of the appeal raised above at the time of the hearing.
2. Brief facts of the case are as under: Assessee filed its return of income for year under consideration on 29.09.2008, declaring total income of rupees ‘Nil’. The return was processed under section 143(1) and case was subsequently selected for scrutiny and notices under section 143(2) was issued and served upon assessee. Detailed questionnaire alongwith notice under section 143(2) and 142(1) was served upon assessee. Representative of assessee attended assessment proceeding from time to time and furnished required documents including books of accounts, bills and vouchers, bank statement which were put to test checked.
Ld. AO observed that assessee had commenced operations in the year 2004 and was engaged in providing professional services in respect of editing, printing and publishing to non-resident clients.
During assessment proceedings from details filed by assessee Ld. AO observed that assessee had received subscription money from Helion Ventures Partners India Ltd., amounting to Rs.2,02,98,782/- on 23.05.2007 and Rs.6,55,36,000/- on 07.08.2007. Assessing officer asked FIRC copy, to prove the genuineness of cash credit. Assessee submitted required documents and submitted that Helion Ventures Partners India Ltd., was a reputed international venture capital fund based at Mauritius. Ld. AO, however, treated Rs.8,30,94,577/- as revenue receipt and added it to income of assessee. 5. Aggrieved by addition made by assessing officer, assessee preferred an appeal before Ld. CIT(A) deleted the addition made by assessing officer. 6. Aggrieved by order of Ld. CIT(A) revenue is in appeal before us now. 7. Ld. DR submitted that only issue is in respect of treatment of Rs.8,30,94,577/- as revenue receipt or capital receipt in hands of assessee. He placed reliance upon order of Ld. AO. 8. On the contrary, Ld. AR places reliance upon order of Ld. CIT(A).
We have perused findings of Ld. CIT(A) as well as submissions advanced by both sides. All the grounds raised
are interrelated and being common issue, the same are being disposed of together
10. It is pertinent to note that Ld. CIT(A) had referred issue to FT & TR Division of Department for verifying transaction through Competent Authority of Government of Mauritius. It has been observed by Ld. CIT(A) that investigation report forwarded by FT & TR division does not indicate any non- genuine transaction in this case. He further observes that assessing officer has not questioned genuineness of transaction and hence issue need not be examined under section 68 of the Act. Ld. CIT(A) thus came to conclusion that prize of shares fixed by virtue of agreements are mutually agreed between two parties. Further, there is a categorical finding by Ld. CIT(A) that issue of share capital was a source of funding and not a case of transfer of any undertaking which could attract provisions of section 50A or 50B of the Act. Ld. CIT (A) has observed as under: “4.5 It is pertinent to mention that my Ld. Predecessor CIT(A)-IX referred the matter-to FT & TR Division of the Department for verifying the transaction through competent authority of the Government of Mauritius. The investigation report forwarded by FT & TR-Division does not indicate any non genuine transaction in this case. The AO has not questioned the genuineness of the transaction and hence the issue is not to be examined u/s 68 of the Act. ln this facts and circumstances, it can be seen that price of shares is fixed by virtue of agreements as mutually agreed between two parties, Unless the AO has brought some other material facts of the record to contradict the agreed price, the price agreed has to be accepted as correct. Price charged above the book value and paid by the buyer is a business consideration which to be left to the buyer and seller. As far as "slump sale" is concerned, allotment of shares is not a transfer as per the definition u/s 2(47) of the Act. As regards to the nature of receipt whether capital or revenue, the Ld. AR of the appellant cited the decision of the Hon'ble ITAT, Kolkata in (Kol.) in order dated 01.02,2012 in the case of DCIT Vs. Hooghly Dock & Port Engineers Ltd. wherein the receipt under equity capital has been considered as capital receipt. Since, the amount received as the shares premium is in the nature of capita receipt, the same cannot be treated as Income from other sources' (even indirectly u/s 68 as held by AO) in view of the decision in the case of CIT Vs. Steller Investment Ltd. 115 Taxman 1999 and CIT Vs. Sophia Finance Ltd. 70 Taxman 1969. 4.6 The premium on issue of shares is capital receipt and it cannot be taxed as revenue income under any circumstances. In judicial pronouncement mentioned above, it is emphasized that share capital being in the nature of a capital receipt; it cannot under any circumstances be treated as of revenue nature to be taxed as income from other sources. In the present case also, the appellant received the amount as capital receipt between nominal value of share and premium thereon. The AO erroneously has treated such capital receipt as being of revenue nature. The investment made by the Foreign Venture Capital Fund was under the policy of GOI inviting foreign investment, In accordance with guidelines as issued by the RBI they permit the parties to the transactions to fix the terms and price of issue of shares in case of non-listed companies. In this case also, the price of issue of shares was by virtue of agreements as mutually agreed to between the parties. Thus, there is nothing perverse in the terms of the agreement or the premium charged by appellant from the venture capital fund, It is beyond the powers vested upon the AO to evaluate the price/premium in respect of the share issued as this is not the case of understatement of values shown by the appellant. Under the Act, it is only Sec. 55A of the Act which refers to valuation of assets by the Valuation Officer. Erstwhile section 16A of the Wealth Tax Act also places fetters on power of the AO making it obligatory to refer the valuation to Valuation Officer in case of understatement of valuation of any asset. In either case, these provisions refer to understatement of valuations. The present is not one related to the understanding issue price of the share. 4.7. The transactions are related to issuance of share capital which is the source of Funding and not a case of transfer of any undertaking or part of undertaking so as to attract provisions of section 50A and/or 50B as erroneously done by the AO. So far as the appellant is concerned it raised its bank balance when it received the capital contribution. There was no transfer of any asset by the assessee to any person. This is a case of allotment. Allotment of share is not included within the definition of "transfer" u/s 2(47) of the Act.”
Hon’ble Bombay High Court in the case of Vodafone India services private limited in WP No. 871 of 2014, vide order dated 10.10.2014 had observed that: “The amount received on issue of shares is admittedly a capital account transaction not separately brought within the definition of Income, except in cases covered by Section 56(2)(viib) of the Act. Thus such capital account cannot be brought to tax as already discussed herein above while considering the challenge to the grounds as mentioned in impugned order."
Respectfully following same, to the peculiar facts of present case we are of the considered opinion that share premium received by assessee from Mauritius Company has to be considered as capital receipt. Accordingly ground Nos. 1 to 4 raised by revenue stands dismissed. In the result appeal filed by the revenue stands dismissed. Order pronounced in the open court on 27th April, 2017.