Income Tax, Issue Update

Amount received as share premium: Applicability of Section 68

Case: Heckyl Technologies Pvt Ltd vs. ITO, Mumbai ITAT

Outcome: Remand


  • The Assessing Officer had made additions under section 56 of the Income Tax Act to the income of the Assessee on account of the share premium received. The Assessing Officer had also recorded the finding that the said sum may also be added under section 68, as the Assessee had failed to prove the identity, genuineness and creditworthiness of the investors.

Key points

  • After careful consideration of the documents submitted by the Assessee, it was pretty clear that the Assessee had more than satisfactorily acquitted itself when it came to establishing all the three crucial components required to be validated under section 68 of the Act viz identity, genuineness and creditworthiness of the investor.
  • Further, it was held that it was the prerogative of the Board of the Assessee Company to decide the quantum of the premium and it was the wisdom of the share-holders to invest on those terms. The Assessee Company was far from being a non company or a zero balance one. It was in possession of assets far in excess of the premium charged even on the day of the charge of such premium. In these circumstances, there would be all the more reason for not charging to tax the share premium collected by the Assessee.
  • Hence, no additions could be made under section 68 of the Income Tax Act.

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