×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
This appeal filed by the revenue is directed against the order of the Learned Commissioner of Income Tax (Appeals) - 4, Kolkata, (hereinafter the ‘Ld. CIT(A)’), dt. 23/06/2016, passed u/ 250 of the Income Tax Act, 1961 (hereinafter the ‘Act’), relating to Assessment Year 2012-13.
2. The assessee is a company and is in the business of transport. It filed its return of income electronically for the Assessment Year 2012-13, on 29/09/2012 disclosing total income of Rs.62,580/-. The Assessing Officer completed assessment u/s 143(3) of the Act, determining the total income at Rs.1,76,62,580/-, interalia making an addition u/s 68 of the Act of share capital received at a premium. The addition was made by the Assessing Officer as there was no compliance from the assessee. At page 2 of the assessment order he held that the identity, genuineness and the creditworthiness of the share applicant companies have not been established and the reasons for investment in this company that has no track record and that too with huge premium is not clarified. He relied on the preponderance of probabilities and made the addition.
2.1. On appeal, the ld. First Appellate Authority deleted the addition by holding that:-
a) The assessee has responded to the notice of the Assessing Officer and filed documents giving full details of each of the 16 share applicant companies who had subscribed to the share capital as well as share premium money raised by the assessee.
b) The addition was made just because the assessee could not ensure the physical attendance of the directors of the share applicant companies. He held that the assessee had no power to compel the directors of the share applicant companies to appear before the Assessing Officer.
c) The share capital reserves and surplus of each of the share applicant companies is far higher than the miniscule investment made by them in the assessee company. As a percentage of the share capital and reserves of surplus, the investment made in the assessee company by these share applicant companies ranged from 0.01% to 0.03% in cases of all companies and only in the case of M/s. Jai Tara Rice Mill, the percentage of investment was 0.20%. Thus, he held that the creditworthiness of share applicant companies are proved.
d) On the hefty share premium, he relied on the 1st proviso to Section 68 of the Act and submitted that this proviso is applicable from the Assessment Year 2013-14 and not to the impugned Assessment Year 2012-13.
e) That the assessee has proved the identity and creditworthiness of the share applicant companies and genuineness of the transactions.
3. Aggrieved the revenue is before us.
4. The ld. D/R, submitted that the share premium charged is excessive and this proves that the transaction is not a genuine transaction. He relies on the order of the Assessing Officer.
5. The ld. Counsel for the assessee, on the other hand submits that the assessee is not a paper company and it is a transport company having substantial turnover, hence substantial investment was made in its equity shares. He submitted that each of the share applicant companies have furnished copy of their PAN, copy of income-tax return filed by them, copy of the annual accounts, copy of audited financial statements, copy of bank account showing the transaction, source of source etc. He filed a paper book running into 322 pages and took this Bench through the evidences filed by each of these companies in support of his contentions.
6. We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:-
7. A perusal of the statement of profit and loss account and balance sheet of the assessee company demonstrates that the revenues from operation was Rs.33,40,000/- for the impugned Assessment Year and other income was Rs.8,92,279/-. The assessee incurred substantial expenditure towards employee’s benefits, depreciation etc. It has fixed assets worth Rs.62,36,839/-. It is in the business of transport. Hence the test to be applied for such companies, in our considered opinion is not the same as that which is to be applied in case of a jamakharchi company or a company on paper which has net worth and no transactions or real asset base.
7.1. We now consider the documentation placed on record by share applicant companies. The ld. CIT(A) at page 11 & 12 of his order has given the following chart reflecting that the share capital & reserves appearing in the balance sheet of respective share holders. This works to negligible percentage:-