Ameya Perfomatt Finserv Private Limited Vs DCIT (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, considered an appeal against the confirmation of an addition of ₹1,14,75,000 made under Section 40A(2)(a) of the Income-tax Act for Assessment Year 2014-15. The assessee, a company engaged in financial services and investment activities, had filed a return declaring nil income. During assessment proceedings, the Assessing Officer noted that the assessee had issued equity shares worth ₹1.22 crore to its associate concern and, in turn, acquired 67,500 unquoted shares of another company at ₹180 per share for a total consideration of ₹1.215 crore through book entries without any cash movement.
The Assessing Officer observed that the face value of the acquired shares was ₹10 per share and concluded that the assessee had paid ₹170 per share in excess. Treating the transaction as a business transaction with an associate concern, the Assessing Officer invoked Sections 40A(2)(a) and 40A(2)(b), treated ₹1,14,75,000 as excessive and unreasonable expenditure, and added the amount to the assessee’s income.
Before the Commissioner (Appeals), the assessee contended that the shares were acquired as long-term investments and were disclosed as non-current investments in the balance sheet. It was also argued that no amount relating to the acquisition had been debited to the Profit and Loss Account and therefore Section 40A(2)(a), which applies to expenditure claimed while computing income, could not be invoked. The assessee further submitted that the Assessing Officer had adopted face value as fair market value without any valuation report or supporting evidence. However, the Commissioner (Appeals) upheld the addition.
