| The Tax Publishers2020 TaxPub(DT) 0508 (Mum-Trib) INCOME TAX ACT, 1961
Section 68
Where assessee's operations and financials did not command huge amount of share premium as received by it and where the entire amount received in the garb of share premium was diverted to pay long-term liabilities, the AO was justified in treating such transaction as colourable device; however, as the assessee made various submissions in that regard, which were not before the AO, therefore, the matter was remanded to AO for fresh consideration.
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Income from undisclosed sources - Addition under section 68 - Assessee received huge amount of share premium - Financials not commanding huge share premium--Treatment as unexplained cash credits
Assessee-company issued shares having face value of Rs. 10 per share at premium of Rs. 390 per share. AO found that valuation report filed by the assessee to justify charging of share premium was not reliable as the estimated revenue of operation was at large variance from the actual revenue of operation in particularly in next two assessment years. Further, he found that EPS of assessee was negative; in the year before, in the year of receipt of share premium and even in the year thereafter and the assessee did not have any business activities after the receipt of share premium. Further, he also found that the said funds were utilized in repaying existing long-term borrowings. Accordingly, the amount received on account of share capital and share premium was treated by the AO as unexplained credit within the meaning of section 68. Held: Assessee's operations and financials did not command such huge amount of share premium and the entire amount received in the garb of share premium was diverted to pay long-term liabilities. Furthermore, the impugned transaction was between group concerns. Assessee submitted that those concerns belong to a reputed group and they were not fly by night operators. That made it amply clear that for paying off the loan of the assessee-company, a group company was accommodated by introducing money in the form of share premium. In substance, it was not at all share premium and was, in fact, a misuse of the corporate veil. However, it was also found that the assessee made various submissions in that regard, which were not before the AO, therefore, in view of interest of justice, the matter was remanded to AO for fresh consideration.
Distinguished:CIT v. Durga Prasad More (1971) 82 ITR 540 (SC) : 1971 TaxPub(DT) 0375 (SC), Pr. CIT v. Apeak Infotech & Ors. (2017) 397 ITR 148 (Bom.) : 2017 TaxPub(DT) 4092 (Bom-HC), Vodafone India Services Pvt. Ltd. v. UOI & Ors. (2014) 368 ITR 1 (Bom.) : 2014 TaxPub(DT) 3959 (Bom-HC), and Bisakha Sales Pvt. Ltd. v. CIT [in ITA No. 1493/Kol/2013] : 2014 TaxPub(DT) 3992 (Kol-Trib)
REFERRED :
FAVOUR : In assessee's favour (by way of remand)
A.Y. : 2012-13
IN THE ITAT, MUMBAI BENCH
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