Case summary

Usekiwi Infolabs Pvt Ltd vs ITO

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Assessee is a company, it filed its return of income on declaring loss of ₹ 886,908/–. The case of the assessee was selected for scrutiny under computer assisted scrutiny selection as limited scrutiny on the point of examination of the large share premium received during the year to verify applicability of Section 56(2)(viib) and whether the funds received in the form of share premium are from disclosed sources and have been correctly offered for tax. Therefore notice u/s 143(2) was issued. The learned assessing officer noted that as the alleged transaction of receipt of share capital and share premium of Rs 1 67,50,000 from Messer’s K start LLC of Mauritius is suspicious, he referred the matter to the FT & TR, Ministry of Finance.

The assessee was asked to show cause why the above sum shall not be added u/s 68. The facts clearly shows that assessee has got an investment from Kstart LLC, Mauritius as a contribution towards issue of 20,000 compulsorily convertible preference shares having face value of ₹ 10 each at a premium of ₹ 827.50 per share. For this proposition the bank account of K start LLC with Deustch bank shows that a sum of US dollar 2,45,962.54 were transferred on 3 February 2016. In view of the above facts it is apparent that creditworthiness and genuineness of the above investment cannot have any doubt.

Delhi ITAT has perused the provisions of Section 68 which speaks about taxing any sum credited in the books of account of the assessee for which assessee could not satisfy the learned assessing officer about the nature and source of such credit. Further looking at the provisions u/s 56 (2) (viib), it clearly applies to the resident and not to a sum received from a non-resident. Therefore, this section does not apply to the impugned transaction. The learned assessing officer was directed to delete the addition of Rs 167,50,000 made u/s 68. In the result appeal of the assessee is partly allowed.

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