Allotment of Share at High Premium for Cash | Gift | Lifting of corporate veil | Section 56(2)(viia)

Vaani Estates Pvt. Ltd. Vs ITO (ITAT Chennai)

Provisions of Section 56(2)(viib) of the Act, cannot be invoked in the case of the assessee company because by virtue of cash being brought into the assessee company by Mrs. Sasikala Raghupathy for allotment of equity shares with unrealistic premium the benefit has only passed on to her daughter Mrs. Vani Raghupathy and there is no scope in the Act to tax when cash or asset is transferred by a mother to her daughter. Hence we hereby direct the Ld.AO to delete the addition made by invoking the provisions of Section 56(2)(viib) of the Act in the case of the assessee company.

FACTS

The“assessee was a Private Limited Company engaged in real estate business, which filed its return of income for the assessment year 2014-15, declaring loss of ₹4,40,920/-. Initially, the return was processed under Section 143(1) of the Act and subsequently, the case was selected for scrutiny under CASS(Computer Assisted Scrutiny System) and notice under Section 143(2) of the Act was served to the assessee on 23.09.2015. Finally, the assessment order was passed under Section 143(3) of the Act on 16.11.2016 wherein the Ld.AO had made an addition of ₹23,31,68,600/- towards ‘Income from other sources’ invoking the provisions of Section 56(2)(viib) of the Act.”