Section 56(2)(vii) not applies to shares received via proportionate rights issue

ITO Vs Rajeev Ratanlal Tulshyan (ITAT Mumbai)

The dispute in ITO vs Rajeev R Tulshyan before the ITAT Mumbai centered on the tax implications of shares allotted to the assessee during a rights issue by Kennington Fabrics Pvt. Ltd. (KFPL) for the Assessment Year 2014–15. The Assessing Officer (AO) had added ₹42.87 crores to the assessee’s income under Section 56(2)(vii)(c)(ii) of the Income Tax Act, arguing that the shares were allotted below fair market value (FMV), which constituted “income from other sources.” The assessee contended that the shares

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