East Delhi Leasing P. Ltd Vs ITO (ITAT Delhi)
ITAT Delhi held that invocation of provisions of section 56(2)(viib) of the Income Tax Act erroneous as there is no over-valuation of shares over the fair market value of shares. Accordingly, addition made u/s. 56(2)(viib) deleted.
Facts- AO, during the course of the assessment proceedings, found that the Assessee had received share capital with premium amounting to Rs. 14.93 crores from two entities viz. M/s King Merchandise (P) Ltd. and M/s BGS Credit (P) Ltd. These shares had a face value of Rs. 10/- each which had been issued with a share premium of Rs.90/- at Rs.100 per share. Rejecting assessee contention, AO made an addition of Rs.12,08,73,280/- under the provisions of section 56(2)(viib) r/w section 2(24)(xvi) of the Income Tax Act.
Additionally, the AO examined the accounts of the two subscribing companies M/s King Merchandise (P) Ltd. and M/s BGS Credit (P) Ltd. and finding that they had availed funds in the preceding years from five Calcutta based companies opined that it was done to inflate their respective Reserves. Accordingly, AO held that the addition had to be made under Proviso to Section 68 of the Act. Accordingly, the AO made an addition of Rs. 14.93 crores.
