INCOME TAX ACT, 1961

Section 56(2)(viib)

Income from undisclosed sources - Under section 56(2)(viib) - Applicability of provisions - Shares issued to non-residents

AO made addition by invoking provisions of section 56(2)(viib) in respect of shares issued by assessee-company to a lady named 'V'. Assessee submitted that, provisions of section 56(2)(viib) would not be applicable in respect of the shares issued to 'V' because she was a non-resident in the subject year and the provisions of the said section were applicable only in respect of the shares issued by the company to a resident. Held: It was not disputed that provisions of section 56(2)(viib) would be applicable only in respect of the shares issued by the company to a resident. Further, as per provisions of section 6, it was very clear that if the person in question was not in India in the relevant previous year for 60 days or more, then such a person could not be said to be a resident in India in that year. Further, it was found that passport copy of 'V' was not submitted before AO or CIT (A) and it was submitted before the Tribunal for the first time as additional evidence. Therefore, the matter was restored to the AO with a direction to examine the same as per law and give a categorical finding as to whether the said person from whom the amount in question was received by the assessee, was resident in India or not in the subject year and thereafter, decide the aspect as to whether the provisions of section 56(2)(viib) would be applicable or not. Further, the AO was also directed that he could not change the method of valuation of shares chosen by the assessee.

REFERRED : Vodafone M-Pesa Limited v. PCIT & Others (2018) 164 DTR 257 (Bom) : 2018 TaxPub(DT) 1191 (Bom-HC) M/s. VBHC Value Homes Pvt. Ltd. v. ITO [ITA No. 2541/Bang/2019 dated 12-6-2020] M/s. Innoviti Payment Solutions Pvt. Ltd. v. ITO (2019) 175 ITD 10 (Bang.) : 2019 TaxPub(DT) 0791 (Bang-Trib)

FAVOUR : Matter remanded

A.Y. :

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