ALLIANZ INTERNATIONAL PVT LTD,NEW DELHI vs. ITO WARD - 2(2), NEW DELHI
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?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’ NEW DELHI
Before: SHRI SAKTIJIT DEY
per share, in terms of Rule 11UA.
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.
Therefore, I direct the Assessing Officer to delete the addition of Rs.2.12.161. Grounds are allowed.
In the result, the appeal is allowed. Order pronounced in the open court on 31st March, 2023.
More judgments on Section 56(2)(viia)
- DCIT CC 13, Jhandewalan vs Electricals and Electronics India Limited…ITA 7999/DEL/2025[2017-18]Status: Disposed29 Sept 2026AY 2017-18
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- M/S Energy Development Company Limited… vs DCIT /ACIT Central Circle-2, Gurgaon…ITA 2109/DEL/2026[2019-20]Status: Disposed23 Sept 2026AY 2019-20
- M/S Energy Development Company Limited… vs DCIT /ACIT Central Circle-2, Gurgaon…ITA 2108/DEL/2026[2018-19]Status: Disposed23 Sept 2026AY 2018-19
- M/S Energy Development Company Limited… vs DCIT /ACIT Central Circle-2, Gurgaon…ITA 2107/DEL/2026[2017-18]Status: Disposed23 Sept 2026AY 2017-18
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