Section 56(2)(viia) of the Income Tax Act
Income-tax Act, 2025: s.92
Section 56(2)(viia) falls under section 56 of the Income-tax Act, 1961, which corresponds to section 92 (Income from other sources) of the Income-tax Act, 2025.
Read section 92 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 56(2)(viia) is DSJ Communication v. DCIT (222 Taxmann 129), cited in 22 of the 102 judgments on BharatTax that turn on this section.
Leading authorities on Section 56(2)(viia)
Reopening of assessment under Section 147 is invalid if mandatory sanction or approval under Section 151 is not obtained from the prescribed authority. The AO must apply their mind and not proceed in a mechanical manner.
Section 56(2)(vii)(c) does not apply to additional shares allotted pro rata to existing shareholders, as there is no scope for any property being received in such a situation.
The term 'allotment of shares' signifies the appropriation of previously unappropriated capital, and shares only come into existence upon such allotment. This principle is relevant for understanding the issuance of bonus shares.
Expenses incurred for buyback of shares are an allowable business expense for the purpose of computation of income. Such expenditure is not in the nature of capital expenditure and is not required to be capitalised.
Shares bought back by a company are not considered the property of the assessee for the purpose of Section 56(2)(viia), as a company cannot hold its own shares as property.
