Bright Lifecare Private Limited Vs DCIT (ITAT Delhi)
Summary : The Delhi Bench of the Income Tax Appellate Tribunal partly allowed Bright Lifecare Private Limited’s appeal for Assessment Year 2023-24, deleting an addition of ₹814.40 crore arising from reclassification of Compulsorily Convertible Preference Shares (CCPS) and a separate share-premium addition of ₹9,58,701 under Section 56(2)(viib). The company, engaged in manufacturing and trading health and sports supplements, vitamins, and beauty and health-care products, had issued CCPS during Financial Years 2011-12 to 2019-20. Under IGAAP, their face value and premium were disclosed as preference share capital and securities premium. Following its transition to Ind-AS, the instruments were classified as financial liabilities because of the contractual buyback obligation. Their fair valuation produced a transitional adjustment of ₹444,31,50,000 through other equity and subsequent premeasurement amounts routed through the profit and loss account. The company had itself disallowed the latter amounts in its tax computations for the relevant assessment years.
In November 2022, the earlier CCPS agreements were revised to delete the buyback clause. With that obligation extinguished, the instruments were reclassified from borrowings to share capital and securities premium. The Assessing Officer treated the resulting ₹814.40 crore credit as taxable under Section 56(2)(viib). The CIT(A) upheld the addition, questioning the valuation evidence and describing the arrangement as a colourable device. The Tribunal found that the impugned credit arose from accounting treatment, without receipt of consideration for issuing shares during the year in respect of that transaction. It held that receipt of consideration was essential for invoking the provision and followed PCIT v. I A Hydro Energy P Ltd, 299 Taxman 304 (Himachal Pradesh High Court). The Tribunal also rejected the expectation that the assessee should prove a negative when receipt could be checked against its bank statements. It found full disclosure in the financial statements, no colourable device, and a failure by the lower authorities to appreciate the earlier voluntary disallowances, resulting in double addition. The ₹814.40 crore addition was accordingly deleted.
