Amount received as share premium: Applicability of Section 68
- The Assessee company had issued 1,41,500 shares of face value of Rs.10/- each at a premium of Rs.90/- per share. The Assessee was asked to explain on what basis it had valued its share with reference to assets and liabilities of the Assessee company. The Assessee was also asked to prove the identity, creditworthiness and genuineness of the parties who had subscribed the above share premium.
- The Assessing Officer made addition on account of “share premium” on the grounds that the Assessee had not filed the valuation report pertaining to the value of the land for which share premium at Rs.90/- per share was received.
- The share premium of Rs. 90/- per share was contributed by the shareholders owing to various facts that the company had purchased the land for a cost of Rs.3.19 crores and also ventured into a project for construction of multi-storied residential project and paid an amount of Rs. 4.77 crores to the collaborator. For the said multi-storied residential project, the approvals were given on 04.06.2013 and on 23.10.2013 vide Licence No. 44/2013 and 89/2013. Thus, it could be conveniently concluded that the premium paid by the shareholders was not without proper reasons.
- The company was in possession of the land and also going ahead with development of residential complex which were reasons sufficient for payment of the premium. The Assessing Officer ignored the fact on record that the Assessee had purchased land at the cost of Rs. 3.19 crores at Village Khirki Daula which adequately supported the share premium raised by the Assessee.
- There was no iota of evidence about the concealment or plough back of undisclosed income to the Assessee. Further, the Assessing Officer did not dispute the identity, genuineness and creditworthiness of the shareholders. Hence, the invocation of the provisions of Section 68 of the Income Tax Act, 1961 for the simple reason of non-filing the valuation report by the Assessee and by not referring the cost of the land to the DVO, and without bringing any material on record to fulfill the criteria of section 68 was not justified.