Case Law Details
PCIT Vs Jigar Jashwantlal Shah (Gujarat High Court)
In a recent landmark case, the Gujarat High Court issued a significant ruling in the matter of PCIT vs. Jigar Jashwantlal Shah. The case, dated 28 August 2023, pertains to tax appeal numbers 80 & 96 of 2023 and addresses a critical issue related to the taxability of shares allotted under Section 56(2)(viic) of the Income Tax Act, 1961. In this article, we will provide an in-depth analysis of the case and its implications.
Detailed Analysis
The core issue at hand revolved around the applicability of Section 56(2)(viic) of the Income Tax Act, which deals with the taxability of property received without consideration or for inadequate consideration. This provision was amended in 2010 to include transactions involving shares of companies that are not substantially owned by the public.
The crux of the matter in this case was whether the allotment of new shares by a company, particularly through right shares, falls under the purview of Section 56(2)(viic). The Gujarat High Court, in its judgment, examined the legislative intent behind this provision.
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I need the full comment and judgement on this ruling
Fresh / Further issue by an existing company, is nothing but dilution / transfer of existing shareholder’s right. The voting right ratio of shareholders, before such issue and after such issue changes. This itself is the causa-causen for valuation and hence, should be covered under s.56.