Case Law Details
Vora Financial Services P. Ltd Vs. ACIT (ITAT Mumbai)
The provisions of section 56(2) (vii) were introduced as a counter evasion mechanism to prevent laundering of unaccounted income under the garb of gifts‘ particularly after abolition of the Gift Tax Act. The provisions were intended to extend the tax net to such transactions in kind. The intent is not to tax the transactions entered into in the normal course of business or trade‘ the profits of which are taxable under specific head of income. It is‘ therefore, proposed to amend the definition of property so as to provide that section 56(2)(vii) will have application to the “property” which is in the nature of a capital asset of the recipient and therefore would not apply to stock-in-trade‘ raw material and consumable stores of any business of such recipient.
If the assessee-company has purchased shares under a buyback scheme and the said shares are extinguished by writing down the share capital, the shares do not become capital asset of the assessee-company and hence Section 56(2)(viia) cannot be invoked in the hands of the assessee company.
FULL TEXT OF THE ITAT JUDGMENT
The appeal filed by the assessee is directed against the order dated 13.11.2017 passed by Ld CIT(A)-6, Mumbai and it relates to the assessment year 20 14-15.
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