Income Tax, Issue Update

Amount received as share premium: Applicability of Section 68

Case: ITO vs. Kns Realtors Pvt. Ltd. (M-S. Kms Realtors Pvt. Ltd.), Delhi ITAT

This case deals with the question – should share premium received considered additional income under section 68?

Delhi ITAT ruled in favour of Revenue in this particular case as the  Assessee had not complied with the requirements of the AO with regards to the genuineness of the transaction.

This issue is seeing a high volume of litigation in 2020. This issue is prevalent in the manufacturing and share trading industry, and if you are serving those domains, it may be prudent to also track the respective industries for tax cases.


  • The Assessing Officer had made additions under section 68 of the Income Tax Act to the income of the Assessee on account of the share premium received.

Key points

  • It was observed that the Assessee had not complied with the requirements of the Assessing Officer in the exercise of forming satisfaction as to the creditworthiness of the share applicants or the genuineness of the transaction. Mere paperwork by the Assessee did not take the authorities anywhere, when the Assessing Officer suspected the real existence of the entities that applied and paid for share application and share premium and insisted that a higher degree of proof was required in that respect. The action of the Assessing Officer was legal and the inference drawn that the Assessee had routed their own money in the books of accounts through the conduit of investor companies was justified.
  • Hence, it was inferred that the additions made under section 68 were justified.

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