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Income Tax Appellate Tribunal, DELHI BENCHE ‘H’ NEW DELHI
Before: SHRI SAKTIJIT DEY, VICE- & SHRI GIRISH AGRAWAL
PER SAKTIJIT DEY, V.P.: This is an appeal by the Revenue against order dated 20.02.2020 of learned Commissioner of Income-tax (Appeals)-32, New Delhi pertaining to assessment year 2014-15.
Effective grounds raised by the Revenue are as under :
"On the facts and circumstances of the case, the Ld. CIT(A) has erred in facts & law of the case in allowing
capitalization of interest on FDRs earned during the period of construction without considering the fact that funds (ECB) were completely free from any encumbrances as there was neither any legal requirement nor any compulsion on the part of the assessee company to make the FDR." "The Ld. CIT(A) has also erred in facts & law of the case by not considering the judgment of Apex Court in Tuticorin Alkali Chemical and Fertilizers Limited Vs . CIT (SC) 227 ITR 172 which is clearly application in this case." 2. "On the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 45,97,44,964/- made on account of share premium without taking into consideration the fact and circumstances of the case and disregarded the serious discrepancies pointed out through Remand Report on the Additional Evidences submitted by the assessee company."
In so far as ground No. 1 is concerned, briefly, the facts are, the assessee acquired an existing hotel from State Bank of India under SARFEASI Act and was in the process of renovating this hotel in the year under consideration. While doing so, the assessee incurred expenses of Rs.21.10 crores, which included financial cost on foreign currency ECB loans of USD 17.45 millions availed for renovating and refurbishment of the hotel.
Since, the foreign currency loan was disbursed in single tranche, the assessee invested some part of the foreign currency loan, not immediately required for business activities, in fixed deposits and earned interest income of Rs.4.48 crores. After netting of the interest income against the interest cost, the assessee declared finance cost at Rs.9.39 crores. While examining the issue in course of assessment proceedings, the Assessing Officer was of the view that the interest income earned on the FDRs has to be treated as income from other sources, as it is not related to assessee’s business activities. Following the decision taken by him in assessee’s case in assessment years 2012-13 and 2013-14, the Assessing Officer added the interest income as income from other sources. The assessee contested the aforesaid addition before learned Commissioner (appeals). Having taken note of the fact that the Tribunal and the Hon’ble High court has decided identical issue in favour of the assessee in assessment years 2012-13 and 2013-14, learned Commissioner (appeals) deleted the addition.
Before us, both the parties agreed that the issue is squarely covered by the decisions of the Tribunal and the Hon’ble High court in assessee’s own cases for the assessment years 2012-13 and 2013-14.
It is observed, while deciding identical issue in assessee’s own cases for the assessment years 2012-13 and 2013-14, the Tribunal has deleted the additions made by the Assessing Officer. In fact, the appeals filed by the Revenue challenging the decision of the Tribunal in assessment years 2012-13 and 2013-14 have been dismissed by the Hon’ble jurisdictional High Court in judgment dated 31.03.2022 in and judgment dated 01.06.2022 in ITA No. 177/2022 for the assessment years 2012-13 and 2013-14 respectively. Thus, respectfully following the decision of the coordinate Bench and the Hon’ble High Court in assessee’s own cases, as discussed above, we uphold the decision of learned Commissioner (Appeals) by dismissing the ground raised.
As regards the issue raised in ground No. 2, briefly, the facts are, in course of assessment proceedings, while examining the financial statement of the assessee, the Assessing Officer noticed that the assessee has received an amount of Rs.45,97,44,964/- as share premium. Noticing this fact, the Assessing Officer called upon the assessee to provide basis of valuation of fair market value (FMV) of shares. Alleging that the assessee failed to provide FMV of shares, the Assessing Officer added back the amount of Rs.45,97,44,964/- under section 56(viia)(ii) of the Act. The assessee contested the aforesaid addition before learned first appellate authority. Before the first appellate authority, the assessee argued that the provisions of section 56(viia)(ii) are not applicable as the assessee has not received any shares during the year. Without prejudice, the assessee submitted that as per section 56(2)(viib), the assessee can value shares at its own option as per Rule 11UA. The assessee submitted that as per the discounted cash flow method (DCF), the value at which the shares were sold with premium is as per FMV. In support of such contention, the assessee furnished a valuation report and other evidences. The additional evidences furnished and submissions made were forwarded to the Assessing Officer for his comments. After taking note of the report of the Assessing Officer, submissions of the assessee and other facts and materials on record, learned Commissioner (Appeals), being convinced with assessee’s claim that the share premium received by the assessee is as per FMV of shares, deleted the addition.
We have considered rival contentions and perused materials on record. As can be seen from the facts on record, the share application money with premium was received by the assessee from its 100% holding company, Unison Hotels Ltd. in the year ended 31.03.2012.
The value of shares, for which the money was received from the holding company was substantiated by a valuation report obtained from a registered valuer, wherein the value was determined by applying DCF method, an approved method under rule 11UA. As rightly observed by learned first appellate authority, the transaction relating to purchase and sale of shares is between a holding company and its subsidiary and no third party is involved. Therefore, no undue benefit has been derived by a third party. Even otherwise also, the valuation of share as per DCF method has been determined by a registered valuer, which is in terms of section 56(2)(viib) of the Act read with Rule 11UA. Even, the alternative method adopted by the assessee for valuation of share was found as per FMV. The aforesaid factual findings of the first appellate authority remain uncontroverted before us, as the Revenue has failed to bring on record any contrary material. Another pertinent fact, which the learned Commissioner (Appeals) has rightly observed, is, the share application money was received in financial year 2012-13 and the terms and conditions of allotment were also decided in the said year.
Therefore, no addition can be made in the impugned assessment year.
Thus, for the aforesaid reasons, we do not find any merit in the ground raised. Accordingly, we uphold the decision of learned Commissioner (Appeals).
In the result, appeal is dismissed.
Order pronounced in the open court on 06 /07/2023