INCOME TAX ACT, 1961

Section 56(2)(viib)

Income from other sources - Addition for fair market value of share issued - Amount not actually received by assessee -

Assessee-company had issued certain equity shares at share premium. AO alleged that fair market value per share was to be calculated under rule 11UA and excess was required to be treated as income of assessee from other sources. Assessee contended that said transactions were entered in books of account by way of journal entries and it did not involve any credit to cash account as the cheques even though issued, were never encashed. Held: There was no dispute with regard to fact that cheques for sale of these shares representing premium were not encashed by assessee. In other words, the amount was not actually received by assessee, and credited in its accounts. Since assessee has not received actual consideration, it has only received cheques which were not encashed, therefore, there being no real inflow of cash involved in aforesaid transactions, amount of entry could not added to taxable income.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2013-14

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