Gaurav Vinimay Pvt. Ltd. Vs DCIT (ITAT Kolkata)
Addition u/s 56(2)(viia) upheld – Fresh allotment of shares at below FMV taxable; appeal dismissed – ITAT Kolkata
In Gaurav Vinimay Pvt. Ltd. vs DCIT (A.Y. 2015-16), the assessee challenged addition of ₹13.53 crore made u/s 56(2)(viia) on allotment of unlisted shares of group companies at a value lower than fair market value (FMV). The AO held that receipt of shares below FMV attracted anti-abuse provisions, and the CIT(A) confirmed the addition after analysing financials of investee companies and concluding that the structure indicated rotation of funds through closely held entities.
Before the ITAT, the assessee argued that fresh allotment of shares is “creation” and not “transfer,” relying on judicial precedents, and therefore outside the scope of section 56(2)(viia). The Tribunal rejected this contention, holding that the term “receives” used in the section has a wide meaning and covers acquisition of shares even through fresh allotment. Referring to CBDT Circular No. 3/2019 and the decision in Sudhir Memon HUF, the Tribunal observed that restricting the provision only to transfers would defeat the legislative intent of preventing undervalued share transactions.
Since shares were admittedly received at a price lower than FMV , the Tribunal upheld the findings of AO and CIT(A), confirmed the addition u/s 56(2)(viia), and dismissed the assessee’s appeal.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. ‘CIT(A)’] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2015-16 dated 15.09.2025.
