INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Issuance of shares in exchange of shares - Applicability of section 68

Assessee company issued shares against debt due to share holder companies on account of purchases of investments. There was no receipt of cash or any money by assessee. The fact was stated before AO, together with details of investments purchased against allotment of shares. The shares so allotted to such sellers of investments, were in terms of agreement entered into by assessee with such companies respectively. Copies of agreement so executed with each of the shareholders were furnished before AO. Entries in books of assessee were passed through journal entries only and no cash or bank transaction was recorded in books. The extract of books of accounts with journal entries was furnished before AO. However, AO rejected contention of assessee and made addition under section 68. Held: Clearly shares were issued in exchange of shares. In balance sheet of assessee company in schedule to share capital, it was very clearly mentioned by way of note that fresh share capital was raised during the year for consideration other than cash. Hence, no any cash was involved in concerned transactions provisions of section 68 did not get attracted. Accordingly, AO was not justified in making addition.

Followed:Anand Enterprises Ltd. [ITA No. 1614/Kol/2016 for A.Y. 2012-13, dt. 26-9-2018]

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13

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