The Tax Publishers2020 TaxPub(DT) 1524 (Mum-Trib)

INCOME TAX ACT, 1961

Section 56(1)

Section 78(2) of the Companies Act, 1956 specifies manner of utilization of share premium account for specified purposes which are relevant only for compliance with provisions of Companies Act, 1956 and have absolutely no relevance for the purpose of Income Tax Act, 1961. In the instant case, there was absolutely no dispute with regard to receipt of share premium by assessee at Rs.990 per share. From 10 corporate share holder group companies of assessee. Also, there was no dispute that all the necessary documents were duly filed before. Further, based on material on record no fault lied with assessee in issuing equity shares of face value of Rs.10 each at share premium of Rs.990 each so far as compliances under FEMA/RBI were concerned and accordingly, addition made under section 56(1) could not be sustained especially when AO had not invoked section 68.

Income from other sources - Taxability - Receipt of huge share premium duly substantiated by assessee - AO taxed the amount received in view of section 78(2) of Companies Act, 1956 on account of non utilization of premium for business purpose

Assessee-company collected huge premium in sum of Rs.10,66,23,000 on allotment of shares face value of Rs.10 each at a premium of Rs.990 per share. AO took the view that assessee-company had violated section 78(2) of Companies Act, 1956 in utilization of share premium received and accordingly, AO taxed share premium amount received by assessee. Under section 56(1) as 'income from other sources'. Held: Section 78(2) of the Companies Act, 1956 specifies manner of utilization of share premium account for specified purposes which are relevant only for compliance with provisions of Companies Act, 1956 and have absolutely no relevance for the purpose of Income Tax Act, 1961. In the instant case, there was absolutely no dispute with regard to receipt of share premium by assessee at Rs.990 per share. From 10 corporate share holder group companies of assessee. Also, there was no dispute that all the necessary documents were duly filed before. Further, based on material on record no fault lied with assessee in issuing equity shares of face value of Rs.10 each at share premium of Rs.990 each so far as compliances under FEMA/RBI were concerned and accordingly, addition made under section 56(1) could not be sustained especially when AO had not invoked section 68.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2010-11



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