The Pr. Commissioner of Income-tax-3, Nagpur v. Apeak Info tech
[Citation -2017-LL-0608-28]

Citation 2017-LL-0608-28
Appellant Name The Pr. Commissioner of Income-tax-3, Nagpur
Respondent Name Apeak Info tech
Court HIGH COURT OF BOMBAY AT NAGPUR
Relevant Act Income-tax
Date of Order 08/06/2017
Judgment View Judgment
Keyword Tags profits and gains of business • share application money • capital receipt • issue of share • share capital
Bot Summary: Whether the amount received as share premium on issue of share by the Respondent Assesses Companies could be taxed as profit and gains of business in the hands of Asseessees under Section 28(iv) of the Act. During the previous year relevant to the subject assessment year 2012-2013, all the Respondent Assessees had increased its Share Capital by issuing its shares at a premium. During the course of assessment, the Assessing Officer negatived the Respondent Assessee's contention that the share premium received by it on issue of shares is was a capital receipt and hence could not be taxed as income. The Assessing officer held that the Respondent Assessee did not have any significant business at the time of issue of share capital to warrant receipt of share premium. Admittedly, the only issue which was urged before the Tribunal is the addition of share capital premium received by the Respondents Assesses to its income under the head of Profit and Gains of Business under Section 28(iv) of the Act. Vs. Dy. Commissioner of Income Tax 7379-7380 of 2016 rendered on 9th August, 2016) wherein, the decision of the Karnataka High Court holding that the amount received on account of shares from various share holders be treated as business income was reversed. The only issue which was urged before the Tribunal as recorded in Para 11 of the impugned order is the addition of share capital and share application money in the hands of the Assessee as income under Section 28(iv) of the Act.


IN HIGH COURT OF JUDICATURE AT BOMBAY NAGPUR BENCH : NAGPUR Income Tax Appeal No. 26/2017 (The Pr. Commissioner of Income Tax-3, Civil Lines, Nagpur vs. M/s.Apeak Info tech Nagpur.) with Income Tax Appeal No. 27/2017 (The Pr. Commissioner of Income Tax-3, Civil Lines, Nagpur vs. M/s. Yogesh Infotech, Nagpur.) with Income Tax Appeal No. 28/2017 (The Pr. Commissioner of Income Tax-3, Civil Lines, Nagpur vs. M/s. Amply Infotech, Nagpur.) with Income Tax Appeal No. 29/2017 (The Pr. Commissioner of Income Tax-3, Civil Lines, Nagpur vs. M/s. Westline Trading Company, Nagpur.) with Income Tax Appeal No. 30/2017 (The Pr. Commissioner of Income Tax-3, Civil Lines, Nagpur vs. M/s. Jasper Commerce, Nagpur.) with Income Tax Appeal No. 31/2017 (The Pr. Commissioner of Income Tax-3, Civil Lines, Nagpur vs. M/s. Inex Infotech, Nagpur) Office Notes, Office Memoramda of Coram, appearances, Court's orders of directions Court's or Judge's orders. and Registrar s Orders. Shri A.J. Bhoot, Advocate for Appellant. CORAM : M.S. SANKLECHA & MANISH PITALE, JJ. DATE : 08.06.2017. P. C.:- 1. All these six appeals by Revenue under Section 260A of Income Tax Act, 1961 (the Act) take exception to common order dated 25th November, 2016 passed by Income Tax Appellate Tribunal (Tribunal). common impugned order of Tribunal 2 ITL 26 to 31 17 dismissed Revenue's appeals in respect of six Respondent Assesses all relating to assessment year 2012-2013. issue arising in all these appeals are identical viz. Whether amount received as share premium on issue of share by Respondent Assesses Companies could be taxed as profit and gains of business in hands of Asseessees under Section 28(iv) of Act. 2. Mr. A. J. Bhoot learned counsel of Revenue states that relevant facts and questions arising for our consideration in all these six appeals are identical and be heard together. Therefore they are heard together. 3. Although numerous questions of law has been raised in six appeals, Mr. A. J. Bhoot learned counsel for appellant urges only following questions of law for our consideration in all these appeals. A. Whether on facts and in circumstances of case and in law, Tribunal was correct to uphold decision on CIT(A) that share premium received by Assessee Company cannot be taxed under Section 68 of Act ignoring ratio laid down by this Court in its decision in 3 ITL 26 to 31 17 reported 359 ITR (Bom) Pg. 450 (M/s. Major Metals vs. UOI)? B. Whether on facts and in circumstances of case and in law, Tribunal as well as Commissioner of Income Tax (Appeals) was right in deleting addition made by Assessing Officer, by holding that share premium receipt is capital in nature?. 4. During previous year relevant to subject assessment year 2012-2013, all Respondent Assessees had increased its Share Capital by issuing its shares at premium. During course of assessment, Assessing Officer negatived Respondent Assessee's contention that share premium received by it on issue of shares is was capital receipt and hence could not be taxed as income. Assessing officer held that Respondent Assessee did not have any significant business at time of issue of share capital to warrant receipt of share premium. Thus, Assessing officer while passing assessment order under Section 143(3) of Act in five of six proceedings, on 18 th March, 2015 and in one proceeding on 20th March, 2015 added share premium received to its income as profits and gains of business under Section 28(iv) of Act. ::: Uploaded on - 15/06/2017 5. Being aggrieved by above Assessment orders, Respondent Assessees in all six appeals carried above issue in appeal to Commissioner of Income Tax (Appeals) (CIT(A)). By six distinct orders all dated 15 th March, 2016 (one in respect of each Respondent Assessee) held that Section 28 (iv) of Act would have no application, as it dealt with benefit other than cash or money arising out of business as held by this Court in Mahindra and Mahindra Ltd. vs. CIT reported in 261 ITR 501. It is also to be noted that CIT(A) also held that Section 68 of Act will not apply as during course of Assessment proceedings, complete details of investor i.e. PAN, Balance Sheet of IT Return, copies of Bank statements, resolution of Board authorizing and also parties who made investment have confirmed transaction in Assessment proceedings. In his remand report also assessing officer did not dispute above position. Thus, six appeals of Respondent Assesees were allowed by six orders dated 15 th March, 2016 of CIT(A). 6. Being aggrieved Revenue carried above issue in appeal to Tribunal. Admittedly, only issue which was urged before Tribunal is addition of share capital premium received by Respondents Assesses to its income under head of Profit and Gains of Business under Section 28(iv) of Act. On only issue 5 ITL 26 to 31 17 urged before it, impugned order of Tribunal holds that Section 28(iv) of Act will have application only on amounts received as income and not on capital Account. impugned order placed reliance upon decision of this Court in case of Vodafone India Services Pvt. Ltd. vs. Addl. CIT 368 ITR 01 wherein, it has been held that amount received on share capital including premium are undoubtedly on capital account in absence of express legislation. Further reliance was placed upon decision of Hon'ble Apex Court in M/s G.S. Homes & Hotels P.Ltd. vs. Dy. Commissioner of Income Tax (Civil Appeal No. (S) 7379-7380 of 2016 rendered on 9th August, 2016) wherein, decision of Karnataka High Court holding that amount received on account of shares from various share holders be treated as business income was reversed. impugned order also made reference to unreported decision of this Court in Idea Cellur Limited vs. Union of Indian and others (Writ Petition (Lodg) No. 1462 of 2013 decided on 12th September, 2013) wherein, this Court while dealing with issue of non granting of stay of demand in its writ- jurisdiction has observed that any benefit which is received on capital account cannot be subject matter of Income Tax under Section 28(iv) of Act. Thus, appeals of Revenue were dismissed by following decision of this Court and of Apex Court that receipt of share premium is on capital account and cannot be brought to tax as income. 6 ITL 26 to 31 17 7. In back-drop of above facts, we shall now decide above two questions which arrise for our consideration. 8. Regarding Question A:- (a) issue raised by Revenue in this question is to bring to tax share premium received under Section 68 of Act. We find that issue of bringing share premium to tax under Section 68 of Act was not issue which was urged by Appellant Revenue before Tribunal. only issue which was urged before Tribunal as recorded in Para 11 of impugned order is addition of share capital and share application money in hands of Assessee as income under Section 28(iv) of Act. We find that CIT(A) did consider issue of applicability of Section 68 of Act and concluded that it does not apply. Revenue seems to have accepted same and did not urge this issue before Tribunal. Mr. Bhoot, learned counsel appearing for Revenue also fairly states that issue of applicability of Section 68 of Act was not urged by Revenue before Tribunal. (b). It is settled position in law as held by this Court in CIT vs. Tata Chemicals Ltd., 256 ITR 395 that in appeal under Section 260A of Act, High Court can only decide question if it had ::: Uploaded on - 15/06/2017 7 ITL 26 to 31 17 been raised before Tribunal even if not determined by Tribunal. Therefore, no occasion to consider question as prayed for arises. (c) In any case, we may point out that amendment to Section 68 of Act by addition of proviso thereto took place with effect from 1st April, 2013. Therefore, it is not applicable for subject Assessment year 2012-13. So for as pre-amended Section 68 of Act is concerned, same cannot be invoked in this case, as evidence was led by Respondents- Asessee before Assessing Officer with regard to identity, capacity of investor as well as genuineness of investment. Therefore, admittedly, Assessing Officer did not invoke Section 68 of Act to bring share premium to tax. Similarly, CIT(A) consideration of facts, found that Section 68 of Act cannot be invoked. In view of above, it is likely that Revenue may have taken informed decision not urge issue of Section 68 of Act before Tribunal. (d). We may also point out that decision of this Court in Major Metals Ltd. vs. Union of India, 359 ITR 450 proceeded on its own facts to uphold invocation of Section 68 of Act by Settlement Commission. In above case, Settlement Commission arrived at finding of fact that subscribers to shares of Assessee Company were not creditworthy in as much as they did 8 ITL 26 to 31 17 not have financial standing which would enable them to make investment of Rs. 6,00,00,000/- at premium at Rs. 990 per share. It was this finding of fact arrived at by Settlement Commission which was not disturbed by this Court in its writ-jurisdiction. In present case person who have subscribed to share and paid share premium have admittedly made statement on oath before Assessing Officer as recorded by Tribunal. No finding in this case has been given by Authorities that shareholder/share applicants were unidentifiable or bogus. (e). In above view Question No. is not being entertained in view of decision in Tata chemical Ltd., (supra). Accordingly, question (A) is not entertained. 9. Regarding Question B.:- (a) We find that impugned order of Tribunal upheld view of CIT(A) to hold that share premium is capital receipt and therefore, cannot be taxed as Income. This conclusion was reached by impugned order following decision of this Court in Vodafone India Services Pvt. Ltd. (supra) and of Apex Court in M/s G.S. Homes and Hotel P. Ltd. (supra). In both above cases Court has held that amount received on issue of share capital including premium are on capital account and cannot be considered to be 9 ITL 26 to 31 17 income. (b) It is further pertinent to note that definition of income as provided under Section 2(24) of Act at relevant time did not define as income any consideration received for issue of share in excess of its fair market value. This came into statute only with effect from 1st April, 2013 and thus, would have, no application to share premium received by Respondent Assessee in previous year relevant to assessment year 2012 2013. Similarly, amendment to Section 68 of Act by addition of proviso was made subsequent to previous year relevant to subject Assessment year 2012-13 and cannot be invoked. It may be pointed out that this Court in Commissioner of Income Tax vs. M/s. Gangadeep Infrastructure (P) ltd (Income Tax Appeal No.1613 of 2014 decided in 20 March 2017) has while refusing to entertain question with regard to Section 68 of Act has held that proviso to Section 68 of Act introduced with effect from 1 April 2013 will not have retrospective effect and would be effective only from Assessment year 2013-14. (c) In view of above, Question No.B as proposed also does not give rise any substantial question of law as it is issue concluded by decision of this Court in M/s Vodafone India Services Pvt. Ltd. 10 ITL 26 to 31 17 (Supra) and in Apex Court in M/s G.S. Homes & Hotels P.Ltd. (supra). Thus not entertained. 10. Therefore, all six appeals are dismissed. No order as to costs. (MANISH PITALE, J). (M.S.SANKLECHA, J.) Gohane Pr. Commissioner of Income-tax-3, Nagpur v. Apeak Info tech
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