Savera India Riding Systems Company Pvt. Ltd. Vs DCIT (ITAT Mumbai)
Section 56(2)(viib) Not Applicable to Old Share Application Money – Addition Deleted
Mumbai ITAT deleted addition made under Section 56(2)(viib) on share premium, holding that the provision cannot apply retrospectively where share application money was received prior to its introduction (i.e., before 01.04.2013).
The Tribunal noted that the entire share application money was received in FY 2006–07 and 2007–08, though shares were allotted later in AY 2016-17 due to RBI approval delays. Since no consideration was received during the relevant year, one of the key conditions of Section 56(2)(viib) failed.
Further, the ITAT rejected the CIT(A)’s attempt to sustain the addition under Section 68, holding that:
- Necessary details (identity, creditworthiness, bank statements, ITRs) were already furnished and accepted by the AO
- CIT(A) violated Section 251(2) by making enhancement without notice
- Once AO made no addition u/s 68, CIT(A) cannot arbitrarily invoke it
Additionally, even on merits, the AO’s approach was flawed as he rejected DCF valuation without adopting any prescribed method, which is contrary to law.
Accordingly, the Tribunal held that no addition is sustainable either u/s 56(2)(viib) or u/s 68, and the entire addition was deleted.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
