MI Industries (India) Pvt. Ltd. Vs DCIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi, considered an appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-NFAC dated 04.09.2025 arising from an assessment completed under Section 143(3) of the Income-tax Act, 1961 for Assessment Year 2014-15. The principal dispute related to the addition of ₹15,05,58,000 under Section 56(2)(viib) on account of share premium.
The assessee, a private limited company engaged in setting up a textile processing plant in Aligarh, had issued and allotted 21,82,000 equity shares of ₹10 each at a premium of ₹100 per share to its promoters on 26.03.2012. At the time of allotment during Financial Year 2011-12, the first call comprising share capital and premium was received. During the relevant previous year, the assessee received further call money, including ₹15,05,58,000 towards share premium and ₹1,30,92,000 towards share capital. The Assessing Officer treated the share premium received during the year as income under Section 56(2)(viib) and completed the assessment by making an addition of ₹15,05,58,000. The CIT(A) upheld the addition.
Before the Tribunal, the assessee contended that the shares had already been issued and allotted in Financial Year 2011-12, prior to the introduction of Section 56(2)(viib) and Rule 11UA. It argued that only the recovery of the remaining call money took place during the relevant year and that the contractual issue price had already been crystallised at the time of allotment. It also submitted that the allotment of shares had been examined and accepted in assessments for earlier years and that the promoters continued to hold the shares. Further, it contended that the fair market value (FMV) of the shares, determined under the Discounted Cash Flow (DCF) method through a valuation report based on a Techno Economic Viability Report prepared by Dun & Bradstreet and certified by chartered accountants, was ₹400.89 per share, whereas the shares had been issued at only ₹110 per share (including face value), which was below the FMV. The assessee further argued that even if Section 56(2)(viib) were applicable, only the amount received in excess of FMV could be brought to tax and not the entire share premium.
