Case Law Details
ITO Vs Winstar E Com Pvt. Ltd. (ITAT Mumbai)
In a landmark decision by the Income Tax Appellate Tribunal (ITAT) in Mumbai, the case between the Income Tax Officer (ITO) and Winstar E Com Pvt. Ltd. brings to light the critical interpretation of Section 68 of the Income Tax Act, 1961. The ruling, which pertains to the assessment years 2011-12 and 2012-13, clarifies the conditions under which Section 68 can be invoked, specifically emphasizing that it applies only if the taxpayer fails to explain the nature and source of amounts credited in its books.
The crux of the dispute revolved around the addition of Rs. 2,00,00,000 to the assessee’s income as unexplained cash credits under Section 68 for the AY 2012-13. The Revenue’s argument was based on the premise that share capital received in AY 2007-08, which was only allotted as shares in AY 2012-13, constituted a violation of the statutory provisions of the Companies Act, implying it was a loan disguised as share capital.
The ITAT, however, observed that the assessee company, engaged in information technology services, had indeed received share application money along with share premium in FY 2006-07, which was only transferred to the share capital and share premium accounts in FY 2011-12. Notably, there was no new credit in the books of the assessee in FY 2011-12 except for the allotment of shares against the share application money received in earlier years.
The CIT(A) had directed the assessing officer to delete the addition under Section 68, a decision that the ITAT upheld, noting that Section 68 refers to sums found credited in the books during the year in question. Since the share application money was received in a previous financial year (FY 2006-07) and not the one under scrutiny (FY 2011-12), the addition was not justified.
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