Case Law Details
Dy.CIT Vs Sembcorp Energy India Limited (ITAT Hyderabad)
Applicability of section 56(2)(viib) is only in a case where the shares are issued at a premium by a company in which public are not substantially interested.
Facts- During the course of assessment proceedings, it was craved before AO that price at which the shares were issued to shareholder Gayatri Energy Ventures Pvt. Ltd is Justified in view of the business considerations. Further value as per the request, FMV as per net asset method of rule 11 UA was worked out and provided in submissions. Unfortunately in the current case Id.AO simply carried the additions to the returned income by working the addition based on difference between the issue price and fair market value as per “the net asset value method without appreciating the fact that said method is just one of the method is net asset value method prescribed under rule 11 UA and in the interest of fairness, it was essential to provide the appellant an opportunity to exercise the options prescribed under Explanation (a)(ii) to section 56(2)(viib) of the Act. Not only this, also no prior show-cause notice was issued before making the addition to the returned income as per the assessment order. AO assessed the income of assessee after carrying an addition of Rs. 4,52,02,269 to the returned income under section 56(2)(viib).
On appeal, CIT(A) deleted the addition.
Conclusion- Next comes the issue whether assessee qualifies to be a company eligible for section 56(2)(viib)’s exemption since covered under the clinching legislative expression where a company, not being a company in which the public are substantially interested as per section 2(18)(b)(B)(c) since the said other company was a listed one holding more than 50% of its stake in the relevant previous year the assessee had duly filed its shareholding chart before CIT(A), the correctness of which was nowhere rebutted it was noted that the assessee had duly filed its shareholding chart before the CIT(A) whose correctness had nowhere been rebutted in Revenue s pleadings in the instant appeal. CIT(A) had also placed reliance on Co-ordinate Bench s decision adjudicating the very issue in assessee’s favour and against the department Therefore, there was no reason to interfere with CIT(A)’s correct approach in deleting the impugned section 56(2)(viib) addition in question.
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