INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Unexplained share premium money - Assessee, resulting company formed pursuant to demerger, credited difference between book value of assets transferred and share capital issued to share premium account

Assessee contended that it was resulting company and received various assets as a result of demerger of finance division. All assets and liabilities received were recorded at book value as contained in scheme, according to which consideration for such demerger was issue of shares to shareholders of demerged company in mirror image of its own shareholding. Difference between book value of assets transferred and share capital issued was credited to share premium account. AO made addition of said difference on allegation that genuineness of share premium amount and credit-worthiness of company was not established. Held: Mumbai High Court sanctioned scheme of demerger of investment division of demerged company (Hemant Tools Pvt. Ltd.) with assessee (Jayvik Foresight Innovation and Solution Pvt. Ltd.) in view of Sections 391 to 394 of Companies Act, 1956. Demerged company had reserve and surplus fund and on account of demerger, assessee showed receivable from demerged company and received interest thereon which was offered for taxation under head 'Income from other sources'. Assessee also showed income from sale of investment as capital gain. Identity and creditworthiness was not doubted. There was nothing on record to which it could be assumed that own money was introduced on account of demerger of investment division of demerged company. What was not explained by assessee was not on record. Transaction was properly explained and there was no iota of evidence on record to which it could be assumed that own money was introduced which was liable to addition under section 68.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2012-13

INCOME TAX ACT, 1961

Section 68

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