The Tax Publishers2020 TaxPub(DT) 0542 (Visakhapatnam-Trib) : (2020) 180 ITD 0166 : (2020) 203 TTJ 0891

INCOME TAX ACT, 1961

Section 56(2)(vii)(c)(ii)

It was undisputed that assessee and his brother were the only shareholders prior to fresh allotment and whatever excess benefit was passed on to assessee was out of interest of share holding held by his brother, since section 56(2)(viii)(c)(ii) does not apply in case of money or any property received from any close relative, difference between FMV of shares and consideration paid by assessee was surely covered by exemption clause provided under section 56(2)(vii).

Income from other sources - Applicability of section 56(2)(viii)(c)(ii) - Shares acquired from close relative at price lesser than FMV -

Assessee was an individual and director in M/s. Sardar Projects (P) Ltd. During the year under consideration, assessee acquired shares of said company on 5-4-2013. As cost of acquisition of shares appeared to be much lesser than the Fair Market Value (FMV), therefore, AO estimated FMV as per previous year balance sheets of M/s. Sardar Projects (P) Ltd. and worked out taxable income under section 56(2)(vii)(c)(ii). Assessee's case was that in said company there were only two shareholders, i.e., assessee and his brother before allotment of fresh shares.Held: It was undisputed that assessee and his brother were the only shareholders prior to fresh allotment and whatever excess benefit was passed on to assessee was out of interest of share holding held by his brother, since section 56(2)(viii)(c)(ii) does not apply in case of money or any property received from any close relative, difference between FMV of shares and consideration paid by assessee was surely covered by exemption clause provided under section 56(2)(vii).

REFERRED : Dy. CIT v. Dr. Rajan Pai (2017) 82 Taxmann.com 347 (Bang-Trib) : 2016 TaxPub(DT) 2220 (Bang-Trib), Bharat Hari Singhania v. CWT (1994) 207 ITR 1 (SC) : 1994 TaxPub(DT) 1032 (SC) and Kumar Pappu Singh v. Dy. CIT (2019) 174 ITD 465 (Visakha-Trib) : 2019 TaxPub(DT) 0492 (Visakha-Trib).

FAVOUR : In assessee's favour.

A.Y. : 2014-15

INCOME TAX ACT, 1961

Rule 11U Rule 11UA Section 56(2)(viii)(c)(ii)

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