Shares issued for shares under barter system: Applicability of section 68
- The Assessee had raised share capital including share premium to the tune of Rs.5.01 crore The Assessing Officer added back the entire amount of share capital including premium raised treating the same as unexplained cash credit under section 68 of the Act.
- Reliance was placed on the order of the ‘C’ Bench of Kolkata Income Tax Appellate Tribunal in the case of ITO vs. M/s. Anand Enterprises Ltd., wherein it was concluded that “the provisions of section 68 of the Act did not apply to cases of purchase of share assets and allotment of shares by the appellant when purchase and allotment were made under a barter system. This was a simple case of acquiring shares of certain companies from certain shareholders without paying any cash consideration and instead the consideration was settled through issuance of shares to the respective parties. Moreover, in the balance sheet of the Assessee Company in the schedule to share capital, it was very clearly mentioned by way of note that the fresh share capital was raised during the year for consideration other than cash.”
- Thus, it was concluded that the provisions of section 68 could not be made applicable in the said case.