V.R. Global Energy Pvt. Ltd. (formerly known as TTGS Consolidates Pvt. Ltd.) Vs. ITO (Madras High Court)
Counsel argued, and rightly, that when there was no cash involved in the transaction of allotment of shares, provisions of Section 68 of the said Act treating it as unexplained cash credit are not attracted.
Learned counsel for the appellant assessee emphatically argued that inasmuch as the source of credit in which shares were allotted was clearly explainable, the same cannot be treated as unexplained cash credit. Moreover, the identity of the share holders and the liability of the company to shareholders has been established and, therefore, the allotment of shares cannot be treated as unexplained cash credit.
In Commissioner of Income Tax v. Electro Polychem Ltd., reported in (2007) 294 ITR 661, cited on behalf of the appellant, a Division Bench of this Court held that in case of cash credit of share application money, even if it were to be assumed that the subscribers to the increased share capital were not genuine, the amount of share capital would in no circumstances be regard as undisclosed income of the company.
In Commissioner of Income Tax v. Steller Investment Ltd., reported in (2001) 251 ITR 263, also cited on behalf of the appellant, the Supreme Court held that even if the subscribers to the increased share capital of assessee-company were not genuine, the amount could not be regarded as undisclosed income of the company.
The question of whether the learned Tribunal erred in confirming the valuation of shares allotted in settlement of the pre- existing liability taxable as unexplained cash credit, does not involve any question of law, far less any substantial question of law.
FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT
This appeal is against an order dated 01.9.2016 passed by the Income Tax Appellate Tribunal “C” Bench, Chennai, dismissing the appeal being I.T.A.No.871/Mds/2016 filed by the appellant assessee, M/s.V.R.Global Energy Private Limited, against an order dated 25.02.2016 passed by the Commissioner of Income Tax (Appeals) – 11, Chennai.
2. The appellant assessee is a Company carrying on business of manufacture of Wind Electric Generators and parts of Wind Electric Generators.
3. The appellant assessee filed its return of income for the assessment year 2012-13 on 30.9.2012 declaring income of Rs.40,46,570/-.
4. In the balance sheet, the assessee showed Rs.90,18,00,000/- as share premium as against “Nil” in the immediately previous year ending on 31.3.2011. The assessee had also introduced share capital of Rs.16,70,000/-.
5. It appears that during the aforesaid assessment year, the appellant assessee had issued share capital of total value of Rs.90.34 Crores, out of which, the paid up value of shares allotted was Rs.16.7 lakhs. The balance of Rs.90.18 Crores was shown in the share premium account. The entire share premium and the paid up value was apparently by book adjustment.
6. According to the appellant assessee, one Smt. Vathasala Ranganathan was a partner holding 50% share in the firm M/s.Shriram Auto Finance, which had paid various advance amounts to banks and other institutions on behalf of the companies as per the particulars given below:
