KEEP LEARNING RESOURCES PRIVATE LIMITED, MUMBAI V. INCOME TAX OFFICER WARD-12(1)(4), MUMBAI

ITA 1692/MUM/2023

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Keep Learning Resources Pvt. Ltd. appealed against the order of the CIT(A), which confirmed the addition of Rs. 1,41,11,192 as income under section 56(2)(viib) of the Income Tax Act, 1961. The addition was made by the Assessing Officer due to the excess share premium received over the auditor's valuation of Rs. 663 per share, with actual premiums ranging from Rs. 774 to Rs. 1083 per share. The assessee argued that the share premium was mutually agreed upon with lenders who converted their loans into equity shares, and thus should not be taxable under section 56(2)(viib). However, both the CIT(A) and the Tribunal upheld the addition, citing the precedent that such conversions do not exempt the assessee from the application of section 56(2)(viib).

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 136543 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 29-08-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 14-05-2023
• Other Referred Cases: Milk Mantra Dairy Private Limited Vs. DCIT (140 Taxman.com 168)
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRAKASH KISHINCHANDANI
• Keywords: Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL Mumbai “H” Bench, Mumbai. Before Shri B.R. Baskaran (AM) & Shri Rahul Chaudhary (JM) I.T.A. No. 1692/Mum/2023 (A.Y. 2014-15) Keep Learning Resources Pvt. Ltd. D Wing, Chanakya CHS Link Road, Mahavir Nagar Kandivali West Mumbai-400 067. PAN : AADCC6594R Vs. ITO, Ward 12(1)(4) Aayakar Bhavan M.K. Road Churchgate Mumbai-400 020. (Appellant) (Respondent) Assessee by None Department by Shri Prakash Kishinchandani Date of Hearing 30.08.2023 Date of Pronouncement 31.08.2023 O R D E R Per B.R.Baskaran (AM) :- The assessee has filed this appeal challenging the order dated 14.3.2023 passed by the learned CIT(A), National Faceless Appeal Centre, Delhi and it relates to A.Y. 2014-15. The assessee is aggrieved by the decision of the learned CIT(A) in confirming the addition of Rs. 1,41,11,192/- made by the under section 56(2)(viib) of the I.T. Act. 2. None appeared on behalf of the assessee. We noticed from the record that the adjournment was granted earlier on three occasions. On the last occasion, i.e., when the appeal was posted on 28.8.2013, the Bench adjourned the matter today with the direction that the assessee should appear today. However, none appeared on behalf of the assessee nor any adjournment petition was moved. Accordingly we proceed to dispose of the appeal ex-parte, without presence of the assessee. Keep Learning Resources Pvt. Ltd. 2 3. We heard learned DR and perused the record. During the year under consideration, the assessee has received share premium during the year under consideration ranging from Rs. 774/- to Rs. 1083/- per share. Before the Assessing Officer the assessee filed a valuation report, wherein the value of shares was arrived at Rs.660/- per share. Accordingly the Assessing Officer took the view that the share premium received over and above share value of Rs.663/- is assessable under section 56(2)(viib) of the Act. Accordingly he assessed the excess share premium amount of Rs.1,41,11,192/- under section 56(2)(viib) of the Act. 4. Before the learned CIT(A), the assessee submitted that it had borrowed money from certain persons in the past and a part of those loans was converted into the equity shares. Accordingly, it was contended that such kind of conversion will not be hit by sec. 56(2)(viib) of the Act. It was submitted that the share premium amount was mutually agreed between the assessee and the lenders. The learned CIT(A) did not agree with the above said contention of the assessee. In this regard the learned CIT(A) took the support from the decision rendered by the Kolkata Bench of the ITAT in the case of Milk Mantra Dairy Private Limited Vs. DCIT (140 Taxman.com 168), wherein it was held that the provisions of section 56(2)(viib) of the Act will apply, even when cumulative convertible debentures are converted into the equity shares. Accordingly the learned CIT(A) dismissed the appeal of the assessee. Aggrieved, the assessee has filed this appeal before the Tribunal. 5. The undisputed fact remains in this case is that the shares premium collected by the assessee was more than the valuation arrived at by the auditor in the valuation report. The question is whether the conversion of loan taken in the past into equity shares with share premium would be hit by the provisions of sec.56(2)(viib) of the Act. We notice that this question has been examined and adjudicated by the Kolkata Bench of the ITAT in the above said case, wherein it has been held that the conversion of loan amount Keep Learning Resources Pvt. Ltd. 3 into the equity shares will not exonerate the assessee from application of provisions of section 56(2)(viib) of the Act. Before us no contrary decision was placed or any distinguishing fact, which would compel us to interfere with the decision rendered by the tax authorities, was furnished. Accordingly, we are of the view that the Ld CIT(A) was justified in confirming the assessment of excess share premium amount as income of the assessee under section 56(2)(viib) of the Act. Accordingly we uphold the order passed by the learned CIT(A). 6. In the result, appeal filed by the assessee is dismissed. Order pronounced in on 31.8.2023. Sd/- Sd/- (Rahul Chaudhary) (B.R. Baskaran) Judicial Member Accountant Member Mumbai.; Dated : 31/08/2023 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai. 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) PS ITAT, Mumbai