Case Law Details
Sunita Gupta Share Brokers Limited v. ACIT (ITAT Delhi)- In ‘Multan Electric Supply Co. Ltd..’ (supra), it has been held, inter alia, that any profit which arises on the forfeiture of shares is neither a revenue receipt, nor profit on the working of the company, but is simply the circulating capital of the company, and as such, a capital asset. Taking note of this, in “Asiatic Oxygen Ltd.”(supra), it was observed that Schedule VI – Part I of the Companies Act contains the form in which the balance sheet is to be prepared by the company and it indicate that all capital reserves of the company should be disclosed under the head ”Reserves and Supply” in the liability side of the balance sheet; that the assessee had credited the amount in respect of the forfeited shares under the head “capital reserve”; that thus, the Companies Act itself treats the profit on forfeiture of shares as capital reserve not available for distribution as evidence; that it could not therefore be held that the profit arising to the company on forfeiture of shares is a trading or business profit assessable in the hands of the company; that it is also correct to contend on behalf of the assessee that “Sundaram Iyengar and Sons Pvt. Ltd.”(supra), has wrongly been applied to the instant case. Therein, the amount had admittedly arisen as a result of a trading transaction, having the character of income. In the present case, however, the receipt was on capital account, since the amount was received on account of share capital, having no relevance with trade. As such, the receipt cannot be treated as income.
INCOME TAX APPELLATE TRIBUNAL, DELHI
ITA NO. 4188(Del)2010
Assessment year: 2007-08
Sunita Gupta Share Brokers Limited
Please become a Premium member. If you are already a Premium member, login here to access the full content.
