Case Law Details
ACIT Vs Dhruv Milkose Pvt. Ltd. (ITAT Delhi)
Introduction: The case of ACIT Vs Dhruv Milkose Pvt. Ltd. before the Delhi ITAT delves into the taxation of premium charged on the issue of shares to existing shareholders. The crux of the matter revolves around the interpretation of Section 56(2)(viib) of the Income Tax Act and its applicability in such scenarios.
Detailed Analysis: The Revenue filed an appeal against the order of the CIT(A) concerning Assessment Year 2015-16. The dispute centered on the addition of Rs.4,09,11,014/- made by the AO on account of share premium received, invoking Section 56(2)(viib) of the Act.
During the scrutiny assessment, the AO observed that the share premium received exceeded the Fair Market Value (FMV) of the shares as per Rule 11UA of the Income Tax Rules, 1962. The AO rejected the DCF Method adopted by the assessee and added the premium amount as deemed income.
However, the CIT(A) reversed the addition after considering the factual matrix and legal position. The CIT(A) found merit in the assessee’s contention that the provisions of Section 56(2)(viib) were not applicable in the case. The valuation of shares by the DCF Method was supported by a valuation report, and the allotment was made to an existing shareholder, maintaining the status quo of ownership.
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