Case Law Details
Medicon Leather Pvt. Ltd. Vs ACIT (ITAT Bangalore)
AO could not have accepted the intrinsic value without calling for a value in terms of Rule 11UA of the Rules to find out whether class (i) or class (ii) of explanation (a) to Sec.56(2)(viib) of the Act would be applicable. In this ITAT held that the order of the AO was erroneous.
Facts-
The assessee is a company engaged in the business of manufacture of leather items. The assessee filed return of income for Assessment Year 2015-16 declaring a total loss of Rs.3,20,79,298/-. The case of the assessee was taken up for scrutiny assessment. The AO issued a notice under section 143(2) of the Act dated 20.09.2017 in which among other issues, the AO specifically called upon the assessee to show cause as to why income should not be assessed under section 56(2)(viib) of the Act. Under the aforesaid provisions, if a company in which public are not substantially interested receives in any previous year from a person being a resident any consideration for issue of shares that exceeds the face value of such share, the aggregate consideration received for such share as exceeds the fair market value of the shares, shall be assessed as income under the head “income from other sources”. During the previous year the assessee issued/allotted 560000 Equity shares at premium of Rs.50/- each. It is in this context that the AO called upon the assessee to show cause as to why the provisions of Sec.56(2)(viib) of the Act should not be applied.
The AO thereafter issued another notice dated 07.12.2017 specifically calling upon for explanation as to why a sum of Rs.4,12,85,817/- should not be brought to tax under section 56(2)(viib) of the Act.
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