ALLIANZ INTERNATIONAL PVT LTD,NEW DELHI vs. ITO WARD - 2(2), NEW DELHI

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ITA 3828/DEL/2019Status: DisposedITAT Delhi31 March 2023AY 2015-164 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that Section 56(2)(viia) is not applicable when the sale price of shares is more than the fair market value. Therefore, the addition made by the Assessing Officer was directed to be deleted.

What were the facts?

The assessee sold shares of a company at Rs. 100 per share. The Assessing Officer determined the fair market value (FMV) of these shares to be Rs. 99.13 per share as per Rule 11UA. The Assessing Officer added the difference to the assessee's income under Section 56(2)(viia).

What were the issues?

Whether Section 56(2)(viia) of the Income-Tax Act can be invoked when the sale consideration of shares is higher than their fair market value.

Which sections of the Income-tax Act were involved?

Section 56(2)(viia)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’ NEW DELHI

Before: SHRI SAKTIJIT DEY

For Appellant: Shri S. Krishnan, Advocate
For Respondent: Shri D.K. Shrivastav, Sr. DR
Hearing: 29.03.2023Pronounced: 31.03.2023

per share, in terms of Rule 11UA.

8.

Undisputedly, invoking the provisions of section 56(2)(viia) of the Act, the Assessing Officer has treated the difference between the sale price and FMV of the shares of the assessee as income of the assessee. On careful reading of section 56(2)(viia) of the Act, it is observed that the Assessing Officer can invoke the provision in two contingencies. Firstly, if the shares are received by the assessee without consideration and aggregate FMV of shares exceeds Rs.50,000 then whole of such amount shall be treated as FMV of the shares and added to the income of the assessee. In the second situation, if the consideration for which shares are received is less than the aggregate FMV by an amount exceeding Rs.50,000, such excess amount shall be treated as consideration of the shares and added to the income of the assessee. In the facts of the present appeal, admittedly, the sale price of shares at Rs.100 per share is more than the FMV of the shares determined at Rs.99.13. Therefore, in the first place, the provisions of second 56(2)(viia) of the Act are not applicable.

1.

Therefore, I direct the Assessing Officer to delete the addition of Rs.2.12.161. Grounds are allowed.

9.

In the result, the appeal is allowed. Order pronounced in the open court on 31st March, 2023.

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