ACIT Vs Ruchi Renewable Energy Pvt. Ltd (ITAT Mumbai)
Relief for Subsidiaries: ITAT Mumbai says Premium from Listed Parent outside scope of 56(2)(viib)
Assessee, Ruchi Renewable Energy Pvt. Ltd., issued 92,19,990 equity shares of ₹10 each at a premium of ₹17.50 per share to its parent company Ruchi Infrastructure Ltd., a listed public limited company. The premium received was ₹16.13 crore. Valuation was carried out using the Discounted Cash Flow (DCF) method. AO rejected the valuation, noting that the company had losses, no goodwill, or intangible assets, and no justification for charging such premium. AO taxed the share premium as income under section 56(2)(viib).
CIT(A) deleted the addition, holding that the Investor company (Ruchi Infrastructure Ltd.) is a public limited company listed on BSE & NSE. Section 56(2)(viib) applies only to companies in which public are not substantially interested. Hence, the section was not applicable.
ITAT confirmed that Ruchi Infrastructure Ltd. is a listed public company, falling under section 2(18)(b)(B)(c). Therefore, section 56(2)(viib) does not apply to the assessee’s case. Tribunal relied on Hyderabad ITAT ruling in Apollo Sugar Clinics Ltd. vs. DCIT (2019), which held that if the parent company is a listed public company, its subsidiaries also qualify as companies in which public are substantially interested. Further held that capital receipts like share premium cannot be taxed as “income” under section 56(1) when a specific provision (56(2)(viib)) itself does not apply.
