Case Law Details
M/s. Varsity Education Management Pvt. Ltd. Vs DCIT (ITAT Mumbai)
In the instant case, there is no dispute to the fact that the assessee has received the sum of Rs. 1030/- per share as Share Premium. It is the case of the assessing officer is that he will accept the share premium only to the extent of Rs.672/- per share worked out as per Valuation certificate. Accordingly the AO has considered the amount of Rs.358/- per share as unjustified premium and assessed the same as income of the assessee u/s 68 of the Act. The question that requires to be considered is whether the alleged excess premium of Rs.358/- per share is in the “nature of income or not”, within the meaning of sec.68 of the Act.
There is merit in the contention of the Ld A.R that the share premium amount worked out in the Valuation Certificate is the minimum amount that can be collected by the assessee and hence there is no bar on collecting higher amount as share premium. The Ld CIT(A) has rightly observed that there are several factors that are taken into consideration while issuing the equity shares to shareholders/investors, such as Venture capital funds and Private Equity funds. The Ld CIT(A) has also noticed that the actual financial results achieved by the assessee has exceeded the financial projections. Accordingly he has held that the premium of Rs. 1030/- was determined between the parties on the basis of commercial considerations and agreed to by them, which cannot be questioned by the tax authorities. It is well settled proposition of law that the AO was not entitled to sit on the arm chair of a businessman and regulate the manner of conducting business. Hence, in our view, the AO was not justified in holding that he will accept the share premium amount only to the extent of Rs,672/- only. Hence the AO was not justified in partially not accepting the share premium and accordingly he could not have doubted the genuineness of transactions on this reason.
FULL TEXT OF THE ITAT JUDGMENT
The assessee has filed this appeal challenging the order dated 29-09- 2016 passed by Ld CIT(A)-3, Mumbai and it relates to the assessment year 2012-13. The assessee is aggrieved by the decision of Ld CIT(A) in confirming the addition of Rs.60.24 crores relating to excess share premium made by AO u/s 68 of the Act. The grounds of appeal urged by the revenue read as under:-
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