DCIT CEN CIR 8(3), MUMBAI V. VRINDAVAN SERVICES P.LTD, MUMBAI

ITA 235/MUM/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5474 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 09-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Search and seizure; Share purchase agreement; Fair market value; Capital receipt; Retraction
• Section: 132

Judgement Text

1 ITA 235/MUM/2015 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI JOGINDER SINGH(JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.235/MUM/2015 (ASSESSMENT YEAR: 2011-12) DY.CIT, CENT.CIR.8(3), MUMBAI VS M/S VRINDAVAN SERVICES PVT LTD 54A, JINDAL MANSION, DR. G DESHMUKH MARG, MUMBAI-400 026 PAN : AAACV8987V APPELLANT RESPONDENT APPELLANT BY SHRI SAURABH KUMAR RAI RESPONDENT BY SHRI RAKESH JOSHI DATE OF HEARING 04-05-2018 DATE OF PRONOUNCEMENT 18-07-2018 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A)-36, MUMBAI DATED 16-10-2014 AND IT PERTAINS TO AY 2011-12. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- 1. 'WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS. 8,75,00,0007- ON ACCOUNT OF REDEEMABLE NON CUMULATIVE PREFERENCE SHARES ISSU ED ON 02/06/2003, HOLDING THE SAME AS BENEFIT ARISING OUT OF BUSINESS ACTIVITY CHARGEABLE TO TAX U/S, 28(IV) OF THE INCOME TAX ACT, 1961, ESPECI ALLY WHEN THE SAME IS OFFERED TO TAX AS ADDITIONAL INCOME DURING SEARCH O PERATION.' 2. 'WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) IS JUSTIFIED IN ALLOWING THAT THE PREFERENCE SHARES CANNOT BE REVERSED OR REDEEMED IN VIOLATION OF PROVISIONS OF COMPANIES ACT, 1956.' 3. 'WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) IS JUSTIFIED IN ALLOWING THAT EVEN OTHERWISE THE REDUCTGION IN PREFERENCE SHARES CAPITAL IS ON CAPITAL ACCOUNT AND CANNOT BE TREATED AS 2 ITA 235/MUM/2015 BUSINESS INCOME OF THE PREVIOUS YEAR.' 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY, ENGAGED IN THE BUSINESS OF TRADING IN SHAR ES AND SECURITIES, LEASING OUT PROPERTY HELD AS INVESTMENT, ETC., FILE D ITS RETURN OF INCOME FOR AY 2011-2 U/S 139(1) ON 20-09-2011 DECLARING NIL IN COME. A SEARCH AND SEIZURE ACTION WAS CARRIED OUT U/S 132 OF THE I NCOME-TAX ACT, 1961 IN JSW GROUP OF CASES ON 16-03-2011. DURING THE CO URSE OF SEARCH, BOOKS OF ACCOUNT AND DOCUMENTS BELONGING TO THE ASS ESSEE COMPANY WERE FOUND AND SEIZED. DURING THE COURSE OF SEARCH , THE ASSESSEE GAVE DECLARATION OF INCOME IN A GROUP OF CASES AS PER WH ICH, AN AMOUNT OF RS.8.75 CRORES TOWARDS WRITE BACK OF PREFERENCE SHA RES HAS BEEN OFFERED AS UNDISCLOSED INCOME IN ASSESSEES CASE. HOWEVER, THE ASSESSEE HAS NOT ADMITTED ANY INCOME IN RESPECT OF UNDISCLOSED INCOME ADMITTED DURING THE COURSE OF SEARCH, WHILE FILING RETURN OF INCOME. THEREFORE, THE AO CALLED UPON THE ASSESSEE TO EXPLA IN AS TO WHY ADDITIONAL INCOME DECLARED DURING THE COURSE OF SEA RCH SHALL NOT BE ADDED. IN RESPONSE TO NOTICE, ASSESSEE FILED DETAI LS SUBMISSIONS, AS PER WHICH THE ASSESSEE STATED THAT THE COMPANY HAS RECE IVED LOAN FROM M/S SOUTH INDIA HOUSE INVESTMENTS LTD, DURING THE PERIO D 19-05-2003 TO 30/05/2003 AS SUBSCRIPTION MONEY TOWARDS PREFERENCE SHARES. THE COMPANY HAS ALLOTTED 87,50,000 2.5% REDEEMABLE NON CUMULATIVE 3 ITA 235/MUM/2015 PREFERENCE SHARES OF RS.10 PAID UP EACH TO THE SAID APPLICANT. THE SAID SHARES WERE ALIVE AND OUTSTANDING IN THE BOOKS OF V SPL ON 16-03-2011 AND COMPULSORILY REDEEMABLE PRIOR TO 01-06-2003. O WING TO SEARCH ACTION, TO BUY PEACE AND AVOID LITIGATION, THE ASSE SSEE HAS AGREED FOR DISCLOSURE OF UNDISCLOSED INCOME OF RS.8.75 CRORES BY WRITING OFF REDEEMABLE NON CUMULATIVE PREFERENCE SHARES IN ITS BOOKS OF ACCOUNT. BUT FACTS REMAIN THAT, SUCH REDEEMABLE PREFERENCE SHARES CANNOT BE REDEEMED BEFORE THE SPECIFIED PERIOD, AS PER PROVIS IONS OF SECTION 80 OF COMPANIES ACT, 1956. THE ASSESSEE ALSO STATED THA T THE SAID ADMISSION DURING THE COURSE OF SEARCH IS OF MISTAKE N UNDERSTANDING OF FACTS, THEREFORE, WITHOUT ANY FURTHER EVIDENCE FOUN D DURING THE COURSE OF SEARCH, ONLY ON THE BASIS OF ADMISSION OF THE ASSES SE, A RECEIPT IN THE NATURE OF CAPITAL RECEIPT CANNOT BE TAXED U/S 28(IV ) OF THE INCOME-TAX ACT, 1961. 3. THE AO, AFTER CONSIDERING RELEVANT SUBMISSIONS O F THE ASSESSEE AND ALSO TAKING INTO ACCOUNT MATERIALS COLLECTED DU RING THE COURSE OF SEARCH, INCLUDING STATEMENT RECORDED U/S 132(4) AND SUBSEQUENT DECLARATION LETTER FILED BY THE ASSESSEE DATED 01-0 6-2011 OBSERVED THAT IN PRINCIPLE, THE ASSESSEE HAS ADMITTED SUM OF RS.8 .75 CRORES IS NO LONGER PAYABLE TO M/S SOUTH INDIA HOUSE INVESTMENTS LTD. THERE HAS BEEN NO RETRACTION BY THE ASSESSEE ON THIS ISSUE T ILL DATE. SINCE THE 4 ITA 235/MUM/2015 AMOUNT IS NO LONGER PAYABLE, IT WAS HELD THAT IT IS A BENEFIT DIRECTLY ARISING OUT OF BUSINESS ACTIVITY OF THE ASSESSEE AN D, THEREFORE, CHARGEABLE TO TAX U/S 28(IV) OF THE INCOME-TAX ACT, 1961. 4. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE PREF ERRED APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A, ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSIONS WHICH HAS BEEN REPRODUCED BY TH E LD.CIT(A) AT PARA 5 ON PAGES 4 TO 9 OF HIS ORDER. THE SUM AND S UBSTANCE OF THE ARGUMENTS OF THE ASSESSEE BEFORE THE LD.CIT(A) WAS THAT AT NO STRETCH OF IMAGINATION, A CAPITAL RECEIPT BEING REDEEMABLE NON CUMULATIVE PREFERENCE SHARES CAN BE CONSIDERED AS BENEFIT DER IVED OUT OF BUSINESS CONNECTION AND IS TAXABLE U/S 28(IV) OF THE INCOME- TAX ACT, 1961. 5. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMIS SIONS OF THE ASSESSEE AND ALSO RELYING UPON THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF VODAFONE INDIA SERVICES LTD (W P) NO.871 OF 2014 HELD THAT PREFERENCE SHARE CAPITAL RECEIVED IN FINA NCIAL YEAR 2003-04 IS CAPITAL IN NATURE AND CANNOT BE TAXED U/S 28(IV) OF THE INCOME-TAX ACT, 1961. THE RELEVANT PORTION OF THE ORDER OF CIT(A) IS EXTRACTED BELOW:- 6.6 THE ORAL AND WRITTEN ARGUMENTS MADE BY THE APPE LLANT'S AR HAVE BEEN CONSIDERED. IT IS UNDISPUTED FACT THAT APPELLANT RECEIVED SHARE APPLICATION MONEY OF RS 8.75 CRORES FY 2003-04 FROM SOUTH INDIA INVESTMENT LIMITED IN F Y 2003-04, THE APPELLANT COMPANY HAD ALLOTTED 87,50,000 2.5% REDEEMABLE NON- CUMULATIVE SHARES OF FACE VALUE 10/- TO SAID INVESTOR ON 2.06.2003. A COPY OF SHARE CERTIFICATE HAS BEEN SEIZED DURING SEARCH ACTION. AS PER TERMS OF PREFERENCE SH ARES, THE SAME ARE REDEEMABLE AT THE OPTION OF APPELLANT BEFORE 2.06.2023. IT IS THE CASE OF APPELLANT THAT THE SHARES WERE ALLOTTED IN FY 2003-04 AND REDEEMABLE IN FY 20 23-24. AS ON DATE OF SEARCH, THE PREFERENCE SHARES WERE OUTSTANDING IN THE BOOKS OF APPELLANT. THE APPELLANT SUBMITS THAT AS PER PROVISIONS OF COMPANIES ACT, 1956 PREFE RENCE SHARES CAN ONLY BE 5 ITA 235/MUM/2015 REDEEMED OUT OF ACCUMULATED PROFITS AVAILABLE FOR D ISTRIBUTION OF DIVIDEND OR PROCEEDS OF FRESH ISSUE OF SHARES. HENCE, APPELLANT CLAIMS THAT LAW FORBIDS IT FROM WRITING BACK ISSUED PREFERENCE SHARES EVEN IF THE S AME ARE CONSIDERED AS NO MORE REDEEMABLE. EVEN OTHERWISE, THE APPELLANT CONTENDS THAT PREFERENCE SHARE CAPITAL IS CAPITAL RECEIPT AND NOT CHARGEABLE TO TAX. 6.7 THE AO HAS ADDED THE PREFERENCE SHARE CAPI TAL TO BUSINESS INCOME U/S 28(IV) AS BENEFIT OR PERQUISITE, WHETHER CONVERTIBL E INTO MONEY OR NOT, ARISING FROM BUSINESS. THOUGH THE APPELLANT HAS_OT REVERSED THE REFERENCE SHARE CAPITAL IN ITS BOOKS, NOR CREDITED IT TO P&L ACCOUN T, AO HAS SOLELY RELIED UPON THE DISCLOSURE MADE DURING THE SEARCH ASSESSMENT. I T IS A SETTLED LAW THAT SUBSCRIPTION TO SHARE CAPITAL IS CAPITAL RECEIPT UN LESS THE SAME IS PROVED TO BE NON GENUINE IN THE YEAR OF RECEIPT. IN THIS CASE SHARE CAPITAL HAS BEEN RECEIV ED IN FY 2003-04 RELEVANT TO AY 2004-05 AND THE SAME IS REDEEMABLE TILL FY 2023-24 STRICTLY AS PER PROVISIONS OF COMPANIES ACT . EVEN IF, IT IS PRESUMED, THAT THE SUM IS NO MORE PAYABLE, STILL THE UP SHARE CAPITAL CAN NEITHER' BE REVERSED IN BOOKS NOR REDEEMED WITHOUT BEING SOURCE D FROM ACCUMULATED PROFITS OR PROCEEDS OF FRESH ISSUE OF EQUITY SHARES DUE TO FETTERS IMPOSED OF COMPANIES LAW. I AM BOUND TO AGREE WITH ARGUMENT OF THE APPELLANT THAT EVEN IN CASE OF REDEMPTION, THIS IS A CASE OF MONEY GOING O UT AND NOT COMING IN SO AS TO DERIVE ANY INCOME FROM THE SAME. FOR THE SAKE OF AR GUMENT, HOWSOEVER ILLOGICAL, EVEN IF IT IS PRESUMED THAT THE SAID PREFERENCE SHA RE CAPITAL COULD BE WRITTEN BACK IN THE YEAR UNDER CONSIDERATION, STILL IT BEING A S UM RECEIVED ON CAPITAL ACCOUNT CANNOT BE CHARGED TO TAX. WHILE THE AO HAS SOUGHT T O CHARGE THE PREFERENCE SHARE CAPITAL WHICH IN HIS OPINION IS NO MORE REPAYABLE A S BUSINESS INCOME U/S 28(IV) OF THE ACT AS 'THE VALUE OF ANY BENEFIT OR PERQUISITE, WHETHER CO NVERTIBLE INTO MONEY OR NOT, ARISING FROM BUSINESS OR THE EXERCISE OF A PROFESSION', THERE ARE A SERIES OF AUTHORITIES INCLUDING JURISDICTIONAL HIGH COURT IN THE CASE OF XYLON HOLDINGS PVT LTD (SUPRA), MAHINDRA AND MAHINDRA LTD (SUPRA), AND OTHER HIGH COURT AND TRIBUNAL RULINGS WHICH HAVE HELD THAT THE PROVISION S OF SECTION 28(IV) APPLY TO THE VALUE OF BENEFIT OR PERQUISITES WHETHER CONVERTIBLE INTO MONEY OR NOT, ARISING FROM BUSINESS, BUT DOES NOT APPLY FOR BENEFIT RECEIVED I N CASH OR MONEY AS A RESULT OF THE WAIVER OF PRINCIPAL AMOUNT OF LOAN. 6.8 THE HONOURABLE BOMBAY HIGH COURT IN ITS RECENT DECISION IN THE CASE OF VODAFONE INDIA SERVICES PVT LTD (WP NO 871 OF 2014) HELD THAT THE AMOUNTS RECEIVED ON ISSUE OF SHARE CAPITAL INCLUDING THE PR EMIUM IS UNDOUBTEDLY ON CAPITAL ACCOUNT. DWELLING ON THIS ISSUE, HON'BLE COURT OBSE RVED IN PARA 25 OF ORDER DATED 10.10.2014 AS FOLLOWS: '...,T\IE WORD INCOME FOR THE PURPOSE OF THE ACT HA S A WELL UNDERSTOOD MEANING AS DEFINED IN SECTION 2(24) OF THE ACT. THIS EVEN W HEN THE DEFINITION IN SECTION 2(24) OF THE ACT IS AN INCLUSIVE DEFINITION. IT CAN NOT BE DISPUTED THAT INCOME WILL NOT IN ITS NORMAL MEANING INCLUDE CAPITAL RECE IPTS UNLESS IT IS SO SPECIFIED, AS IN SECTION 2(24) (VI) OF THE ACT* IN SUCH A CASE , CAPITAL GAINS CHARGEABLE TO TAX UNDER SECTION 45 OF THE ACT ARE, DEFINED TO BE INCOME. THE AMOUNTS RECEIVED ON ISSUE OF SHARE CAPITAL INCLUDING THE PR EMIUM IS UNDOUBTEDLY ON CAPITAL ACCOUNT. SHARE PREMIUM HAVE BEEN MADE TAXAB LE BY A LEGAL FICTION UNDER SECTION 56(2)(VIIB) OF THE ACT AND THE SAME I S ENUMERATED AS INCOME IN SECTION 2(24)(XVI) OF THE ACT. HOWEVER, WHAT IS BOU GHT INTO THE AMBIT OF INCOME IS THE PREMIUM RECEIVED FROM A RESIDENT IN EXCESS O F THE FAIR MARKET VALUE OF 6 ITA 235/MUM/2015 THE SHARES. IN THIS CASE WHAT IS BEING SOUGHT TO BE TAXED IS CAPITAL NOT RECEIVED FROM A NON-RESIDENT I.E. PREMIUM ALLEGEDLY NOT RECE IVED ON APPLICATION OF ALP. THEREFORE, ABSENT EXPRESS LEGISLATION, NO AMOUNT RE CEIVED, ACCRUED OR ARISING ON CAPITAL ACCOUNT TRANSACTION CAN BE SUBJECTED TO TAX AS INCOME...' IN THE IMPUGNED CASE, WHAT THE AO HAS SOUGHT TO TAX AS BUSINESS INCOME U/S ) IS PREFERENCE SHARE CAPITAL RECEIVED IN FY 2003-04 WHICH IS NOT PERMISSIBLE AS SAME IS ON CAPITAL ACCOUNT. RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE DICTIONAL HIGH COURT, THE ADDITION MADE AO ON ACCOU NT OF PREFERENCE SHARE CAPITAL IS THEREFORE NOT FOUND IN ORDER AND HENCE D ELETED. THE GROUND OF APPEAL IS ALLOWED. 6. THE LD. DR SUBMITTED THAT THE LD.CIT(A) WAS ERRE D IN DELETING ADDITION MADE BY THE AO TOWARDS UNDISCLOSED INCOME ADMITTED DURING THE COURSE OF SEARCH ON ACCOUNT OF WRITE BACK OF RE DEEMABLE NON CUMULATIVE PREFERENCE SHARES OF RS.8.75 CRORES WITH OUT APPRECIATING THE FACT THAT THE ASSESSEE ITSELF HAS ADMITTED THAT SUC H SHARE CAPITAL IS NO LONGER PAYABLE AND HENCE, IT IS A KIND OF BENEFIT D ERIVED OUT OF BUSINESS CONNECTIONS WHICH IS CHARGEABLE TO TAX U/S 28(IV) O F THE INCOME-TAX ACT, 1961. THE LD.CIT(A) COMPLETELY IGNORED THE FACT TH AT THE ASSESSEE HAS ADMITTED SUCH UNDISCLOSED INCOME IN HIS STATEMENT R ECORDED U/S 132(4) AND SUCH STATEMENT HAS BEEN RECORDED FROM SHRI MVS SESHAGIRI RAO, MANAGING DIRECTOR AND GROUP CFO OF M/S JSW GROUP O F COMPANIES, WHO IS WELL QUALIFIED. THEREFORE, THE STATEMENT GI VEN BY THE ASSESSEE CANNOT BE IGNORED MERELY FOR THE REASON THAT THE RE CEIPT IS IN THE NATURE OF CAPITAL RECEIPTS. THE LD.DR REFERRING TO THE L ETTER FILED BY THE ASSESSEE BEFORE THE DEPUTY DIRECTOR OF INCOME-TAX ( INV) ON 01-06-2011, SUBMITTED THAT THE ASSESSEE HAS CATEGORICALLY STATE D THAT HE HAS AGREED 7 ITA 235/MUM/2015 FOR UNDISCLOSED INCOME IN VARIOUS COMPANIES NAME A MOUNTING TO RS.260 CRORES OUT OF WHICH, AN AMOUNT OF RS.8.75 CR ORES WAS OFFERED IN ASSESSEES NAME TOWARDS WRITE BACK OF PREFERENCE SH ARES FOR WHICH NECESSARY JOURNAL ENTRIES HAVE BEEN PASSED IN THE B OOKS OF ACCOUNT. THE LD.CIT(A) IGNORED ALL EVIDENCES TO DELETE ADDIT ION MADE BY THE AO. IN THIS REGARD, HE RELIED UPON THE DECISION OF HON BLE KERALA HIGH COURT IN THE CASE OF CIT VS ABDUL RAZZAK (2013) 350 ITR 7 1 (KER). 7. ON THE OTHER HAND, THE LD.AR FOR THE ASSESSEE SU BMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE , BY THE DECISION OF ITAT, MUMBAI BENCH IN ASSESSEES OWN GROUP CASE IN M/S NALWA CHROME PVT LTD IN ITA NO.238/MUM/2015 DATED 08-03-2 017 WHEREIN, UNDER SIMILAR SET OF FACTS, THE ITAT HELD THAT RECE IPT IN THE NATURE OF CAPITAL RECEIPT CANNOT BE TAXED U/S 28(IV) OR U/S 4 1(1) MERELY ON THE BASIS OF ADMISSION OF THE ASSESSEE DURING THE COURS E OF SEARCH. THE LD.AR FURTHER SUBMITTED THAT THE COMPANY HAS ISSUED REDEEMABLE NON CUMULATIVE PREFERENCE SHARES IN THE FINANCIAL YEAR 2003-04 AND SUCH PREFERENCE SHARES IS REDEEMABLE ON OR BEFORE 2023 A ND AS PER PROVISIONS OF SECTION 80 OF THE COMPANIES ACT, 195 6, THESE SHARES CANNOT BE WRITTEN BACK IN THE BOOKS OF ACCOUNT OF T HE COMPANY AND COMPULSORILY REDEEMABLE; EVEN OTHERWISE, SAID RECEI PT IS CAPITAL RECEIPT AND CANNOT BE TAXED U/S 28(IV) OF THE INCOME-TAX AC T, 1961. 8 ITA 235/MUM/2015 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES B ELOW. THE AO MADE ADDITION TOWARDS UNDISCLOSED INCOME BEING WRITE BAC K OF REDEEMABLE NON CUMULATIVE PREFERENCE SHARES OF RS.8.75 CRORES ON THE BASIS OF ADMISSION OF THE ASSESSEE DURING THE COURSE OF SEAR CH. ACCORDING TO THE AO, PREFERENCE SHARE CAPITAL IS NO LONGER PAYA BLE, THEREFORE, IT IS IN THE NATURE OF BENEFIT DERIVED FROM BUSINESS ACTIVIT Y AND CHARGEABLE TO TAX U/S 28(IV) OF THE INCOME-TAX ACT, 1961. THE ADDITI ON MADE BY THE AO IS SOLELY BASED ON STATEMENT RECORDED DURING THE COURS E OF SEARCH. SUCH STATEMENT HAS BEEN RECORDED FROM SHRI MVS SESHAGIRI RAO, MANAGING DIRECTOR AND GROUP CFO OF M/S JSW GROUP OF COMPANI ES. IN THE SAID STATEMENT, WHILE ANSWERING A SPECIFIC QUESTION, THE MANAGING DIRECTOR OF JSW GROUP OF COMPANIES HAS ADMITTED UNDISCLOSED INC OME OF RS.262 CRORES WITHOUT SPECIFYING NATURE OF UNDISCLOSED INC OME. THE GROUP HAS FILED A LETTER ON 01-06-2011 ENCLOSING BREAK UP OF THE INCOME OFFERED TO TAX IN VARIOUS GROUP COMPANIES NAMES ALONG WITH CE RTAIN EVIDENCE. ON PERUSAL OF THE DETAILS FILED BY THE ASSESSEE ALONGW ITH LETTER, WE FIND THAT THE ASSESSEE HAS WRITTEN BACK REDEEMABLE NON CUMULA TIVE PREFERENCE SHARES OF RS.8.75 CRORES ISSUED TO M/S SOUTH INDIA HOUSE INVESTMENTS LTD BY DEBITING TO SHARE CAPITAL ACCOUNT AND CREDIT ING TO CAPITAL RESERVE ACCOUNT. THE ASSESSEE CLAIMS THAT REDEEMABLE PREFE RENCE SHARES HAS 9 ITA 235/MUM/2015 BEEN ISSUED IN FINANCIAL YEAR 2003-04 AND AS PER TH E PROVISIONS OF SECTION 80 OF THE COMPANIES AC, 1956 SUCH REDEMPTI ON SHOULD BE COMPULSORILY MADE AS PER THE TERMS OF ISSUE AND IT CANNOT BE WRITTEN BACK IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSEE FURTHER CONTENDED THAT REDEEMABLE PREFERENCE SHARES IS A CA PITAL RECEIPT AND IT CANNOT BE CONSIDERED AS BENEFIT DERIVED OUT OF BUSI NESS ACTIVITY WHICH IS TAXABLE U/S 28(IV) OF THE INCOME-TAX ACT, 1961. TH E ASSESSEE HAS RELIED UPON VARIOUS JUDICIAL PRECEDENTS, INCLUDING THE DEC ISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF VODAFONE I NDIA SERVICES LTD (SUPRA). 9. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATER IAL ON RECORD, WE FIND THAT THE CO-ORDINATE BENCH OF ITAT, H-BENCH, M UMBAI IN THE CASE OF M/S NALWA CHROME PVT LTD VS DCIT (SUPRA) HAS CONSID ERED IDENTICAL ISSUE IN THE GROUP COMPANY OF ASSESSEE IN CONNECTIO N WITH A SEARCH CONDUCTED ON M/S JSW GROUP ON 16-03-02011. THE CO- ORDINATE BENCH, AFTER CONSIDERING RELEVANT FACTS AND ALSO TAKING IN TO ACCOUNT ADMISSION OF THE ASSESSEE, IN THE STATEMENT RECORDED FROM SHRI M VS SESHAGIRI RAO, MANAGING DIRECTOR AND GROUP CFO OF M/S JSW GROUP O F COMPANIES AND ALSO THE LETTER FILED BY THE ASSESSEE ON 01-06- 2011 HELD THAT ADDITION CANNOT BE MADE TOWARDS CAPITAL RECEIPTS ON THE BASIS OF ADMISSION OF THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER IS 10 ITA 235/MUM/2015 EXTRACTED BELOW:- 12. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE L OWER AUTHORITIES AS WELL AS SUBMISSIONS MADE AND JUDGEMENTS PLACED B EFORE US BY BOTH THE SIDES. WE ARE REQUIRED TO DECIDE THE ISSUE WHET HER THE AMOUNT RECEIVED ON ACCOUNT OF SHARE APPLICATION MONEY COUL D BE TREATED AS INCOME OF THE ASSESSEE, IF THE SAME IS WRITTEN-BACK IN THE BOOKS OF ACCOUNT, EITHER U/S 41(1) OR 28(IV) OF THE INCOME-T AX ACT, 1961. BUT BEFORE THAT WE CAME ACROSS ANOTHER FACET VIZ. THE A O HAD RELIED UPON THE STATEMENT MADE BY SHRI M.V.S. SESAGIRI RAO FOR MAKING IMPUGNED ADDITION, WHEREIN AFORESAID AMOUNT HAS BEEN ALLEGED LY OFFERED TO TAX ON BEHALF OF THE ASSESSEE BEFORE US. THEREFORE, WE NEE D TO FIRST DECIDE THE BEARING OF THE SAME ON THE ADDITION MADE BY THE AO. 13. IT IS NOTED FROM THE INFORMATION BROUGHT BEFORE US THAT SEARCH HAD TAKEN PLACE ON JSW GROUP OF COMPANIES WHEREIN STATE MENT OF SHRI M.V.S. SESAGIRI RAO WAS RECORDED WHEREIN HE HAD ALL EGEDLY MADE A SURRENDER OF AN AGGREGATE AMOUNT OF RS.262 CRORES W HICH COMPRISES OF THE AMOUNT OF RS.4.50 CRORES ON ACCOUNT OF WRITE-BA CK OF THE SHARE APPLICATION MONEY. WE HAVE GONE THROUGH THE STATEME NT RECORDED OF SHRI RAO AS WELL AS THE BREAK-UP OF THE AFORESAID S UM, SUBSEQUENTLY PROVIDED BY MR RAO. IT IS NOTED THAT STATEMENT OF S HRI RAO WAS RECORDED U/S 132(4) ON 17-03-20121 BY THE DDIT(INV), UNITY-I X(3), MUMBAI ON THE OCCASION OF SEARCH CARRIED OUT AT THE PREMISES OF JSW GROUP. IN RESPONSE TO THE QUESTION WITH REGARD TO CONNECTION WITH THE JSW GROUP, IT WAS REPLIED THAT SHRI RAO WAS MANAGING DIRECTOR AND GROUP CEO OF JSW GROUP OF COMPANIES AND WAS INCHARGE OF STEEL BU SINESS OF JSW STEEL LTD. IT APPEARS THAT SAID STATEMENT WAS GIVEN BY MR RAO IN THE CAPACITY OF DIRECTOR OF JSW STEEL LTD. IN THE ENTIR E STATEMENT, AT NO PLACE, NAME OF THE ASSESSEE COMPANY HAS BEEN MENTIO NED. THERE IS NO MENTION IN THE ENTIRE STATEMENT WHETHER THE STAT EMENT WAS BEING GIVEN BY SHRI RAO ON BEHALF OF THE ASSESSEE COMPANY ALSO. FURTHER, WE HAVE ALSO GONE THROUGH THE QUESTION AND ANSWERS WIT H REGARD TO SO CALLED OFFER / SURRENDER OF AGGREGATE AMOUNT OF RS. 262 CRORES MADE BY SHRI RAO AND THE SAME IS REPRODUCED HEREUNDER FOR T HE SAKE OF READY REFERENCE:- DO YOU WANT TO SAY ANYTHING ELSE? ANS WER: NO. I HAVE BRIEFLY GONE THROUGH THE SEIZED MATERIALS AND VARIO US STATEMENTS RECORDED AT THIS PREMISES DURING THE COURSE OF THE SEARCH AND SEIZURE PROCEEDINGS. ON PERUSAL OF THE SAME, IT APPEARS THA T THERE ARE CERTAIN DISCREPANCIES 'WITH REGARD TO EXPENSES, CASH PAYMEN TS ETC. ON THE BASIS OF THESE DISCREPANCIES AND TO COVER ANY OTHER DISCREPANCIES THAT MAY ARISE DURING THE COURSE OF ANALYSIS OF THE SEIZ ED MATERIAL AND THE BOOKS OF ACCOUNT OF THE GROUP COMPANIES AND TO BUY PEACE OF MIND AND AVOID LITIGATION, I OFFER A SUM OF RS.262 CRORES AS ADDITIONAL INCOME OF THE GROUP. DETAILED ASSESSEE-WISE AND YEAR-WISE BRE AK-UP OF THE ADDITIONAL INCOME I.E. RS. 262 CRORES WILL BE GIVEN WITHIN A WEEK'S TIME. I REQUEST YOU NOT TO INITIATE PENALTY AND PROSECUTION PROCEEDINGS ON ACCOUNT OF THE FACT THAT THE DISCLOSURE HAS BEEN MA DE VOLUNTARILY. 14. IT IS SEEN THAT IN THE AFORESAID STATEMENT, NAM E OF THE ASSESSEE 11 ITA 235/MUM/2015 COMPANY HAS NOWHERE SPECIFICALLY MENTIONED WHILE OF FERING THE ADDITIONAL INCOME OF RS.262 CRORES. OUR ATTENTION W AS ALSO DRAWN UPON THE BREAK-UP OF THE AFORESAID AMOUNT WHICH WAS CLAI MED TO BE PROVIDED BY SHRI RAO. RELEVANT PART OF THE SAME READS AS UND ER:- NALWA CHROME 2011 - 12 4,50,000/ - WRITING BACK OF THE ADVANCE TOWARDS SUBSCRIPTION TO SHARE CAPITAL. (RELEVANT ENTRY PASSED IN THE BOOKS OF ACCOUNTS) IN ADDITION TO THE ABOVE, OUR ATTENTION WAS ALSO DR AWN UPON THE FOLLOWING JOURNAL VOUCHER WHICH WAS PASSED BY THE A SSESSEE COMPANY DATED 31-03- 2011:- PARTICULARS DR. CR. ADVANCE AGAINST EQUITY 4,50,00,00 0 CAPITAL RESERVE 4,50,00,000 (ON ACCOUNT OF : ENTRY TO TRANSFER ADVANCE AGAINST EQUITY RECEIVED FROM ANAND TRANSPORT TO CAPITAL RESERVE ON ACCOUNT OF BA SIS OF DISCUSSION WITH INCOME-TAX AUTHORITIES) 15. WE HAVE CAREFULLY GONE THROUGH THE ENTIRE EXERC ISE OF MAKING THIS STATEMENT AND FURNISHING OF THIS BREAK-UP OF OFFER OF ADDITIONAL INCOME. IT IS NOTED THAT NOWHERE IT HAS BEEN MENTIONED THAT THE I MPUGNED AMOUNT WAS BOGUS OR NON-GENUINE. IT HAS NOWHERE BEEN ADMITTED THAT THE AFORESAID AMOUNT REPRESENTS UNDISCLOSED INCOME OF THE ASSESSE E. THUS, THERE IS NO ADMISSION ON FACTS BY ANYONE TO THE EFFECT THAT IMP UGNED AMOUNT COULD BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. WHAT HAS BEEN OFFERED IS THAT WRITING BACK OF THE ADVANCE RECEIVED TOWARDS SUBSCRIPTION TO SHARE CAPITAL MAY BE TREATED AS INCOME OF THE ASSESSEE 16. THUS, IT IS A CASE OF PURELY A LEGAL ISSUE. IT IS SETTLED LAW THAT ON LEGAL ISSUE, THE ASSESSEE CANNOT BE ALWAYS MADE BOUND BY ITS ADMISSIONS. IF A PARTICULAR ITEM OR RECEIPT OR TRANSACTION IS TAXABL E AS PER THE PROVISIONS OF THE ACT, THEN IT IS, AND IF IT IS NOT, THEN IT IS N OT. THE POSITION OF LAW REMAINS UNCHANGED AND THE LEGAL POSITION IS NOT ALTERED EVE N ON THE BASIS OF CONSENT OF AN ASSESSEE ESPECIALLY WHEN THE CONSENT IS SUBSEQUENTLY WITHDRAWN. IT IS BECAUSE OF THE FACT THAT AS PER TH E CONSTITUTIONAL FRAMEWORK OF OUR COUNTRY, NO TAX CAN BE COLLECTED EXCEPT AS P ER AUTHORITY OF LAW, AS HAS BEEN CLEARLY LAID DOWN UNDER ARTICLE 265 OF CON STITUTION OF INDIA. VARIOUS COURTS HAVE TIME TO TIME CLARIFIED THIS POS ITION. THEREFORE, ASSESSMENT OF INCOME MUST BE DONE ONLY WITHIN THE F OUR CORNERS OF PROVISIONS OF THE INCOME-TAX ACT, 1961. LD. COUNSEL OF THE ASSESSEE PLACED RELIANCE IN THIS REGARD UPON THE JUDGMENT OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS MALTI MISHRA (SUPR A) WHEREIN LEGAL POSITION IN THIS REGARD HAS BEEN CLARIFIED. RELEVAN T PART OF THE JUDGMENT IS 12 ITA 235/MUM/2015 REPRODUCED HEREUNDER, FOR THE SAKE OF READY REFEREN CE:- 13. IN THE INSTANT CASE, THERE IS NO CONCEALMENT O N THE PART OF THE ASSESSEE REGARDING THE TRANSACTIONS. ALL THE TRANSA CTIONS WERE DULY DISCLOSED. IF THE INCOME AS PER LAW IS EXEMPTED, TH EN THE OFFER OF THE ASSESSEE IS MEANINGLESS AS THE LAW WILL PREVAIL AND WILL SUPERSEDE THE 'OFFER' MADE BY THE ASSESSEE. IN THE INSTANT CASE, SURRENDER WAS TO BUY THE PEACE AS THE ASSESSEE IS NOT AN EXPERT IN INCOM E TAX MATTER. THE DEPARTMENT CANNOT TAKE THE ADVANTAGE OF THE IGNORAN CE OF THE ASSESSEE AS PER CBDT CIRCULAR NO.14(XL35)/1955 DATE D 01.04.1955 MENTIONED IN 150 ITR 105 (KAR). 14. IN THE INSTANT CASE, THE STATEMENT WAS RECORDED OF THE BROKER, WHO HAD CONFIRMED THE S ALE AND PURCHASE. NO CONCEALMENT WAS MADE BY THE ASSESSEE EVEN THEN S HE HAS MADE AN OFFER TO TREAT THE SAID INCOME AS INCOME FROM 'O THER SOURCES'. THE ONLY REASON FOR MAKING THE ADDITION IS THAT IT WAS NOT ENTERED IN THE REGISTER OF THE COMPANY, FOR WHICH, THE ASSESSEE IS NOT RESPONSIBLE SPECIALLY WHEN SHE HAS DISCHARGED THE BURDEN OF PRO OF BY DISCLOSING ALL THE TRANSACTIONS IN THE RETURN, AS PER THE RATIO LA ID DOWN BY THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SUDARSHAN GUPTA, 2008 (10) DTR 134 (P&H). HENCE, WE ARE OF THE VIEW THAT THE S URRENDER LETTER WILL HAVE TO BE IGNORED. THUS, WE FIND NO REASON TO INTE RFERE WITH THE IMPUGNED ORDER PASSED BY THE TRIBUNAL. THE SAME IS HEREBY SUSTAINED ALONG WITH REASONS MENTIONED THEREIN. 17. THUS, FROM THE ABOVE, IT MAY BE NOTED THAT HON BLE HIGH COURT HAS RELIED UPON THE CIRCULAR OF THE BOARD WHEREIN IT HA S BEEN CLEARLY GUIDED BY THE BOARD TO ITS REVENUE OFFICERS THAT THEY SHOULD NOT TAKE UNDUE ADVANTAGE OF IGNORANCE OF ASSESSEE. THUS, FROM THE EVIDENCES BROUGHT BEFORE US AND THE LEGAL POSITION AS DISCUSSED ABOVE , WE FIND THAT THE AO COULD NOT HAVE ADOPTED THE AFORESAID OFFER AS THE S OLE BASIS TO MAKE ADDITION IN THE HANDS OF ASSESSEE. THEREFORE, IN OU R CONSIDERED VIEW, THE TAXABILITY OF THIS AMOUNT AS INCOME IN THE HANDS OF THE ASSESSEE SHOULD BE DECIDED PURELY ON ITS MERITS AND STRICTLY IN ACCORD ANCE WITH THE PROVISIONS OF INCOME-TAX ACT, 1961. 18. AS FAR AS MERITS OF THIS ISSUE ARE CONCERNED, I T IS NOTED THAT THE FACTS ARE UNDISPUTED THAT THE ASSESSEE HAD RECEIVED THE I MPUGNED AMOUNT ON ACCOUNT OF SHARE APPLICATION MONEY WHICH HAS BEEN W RITTEN-BACK AS THE SHARES WERE NOT ALLOTTED. NOW QUESTION ARISES, WHET HER THIS AMOUNT COULD BE TREATED AS PART OF INCOME OF THE ASSESSEE AND TH AT TOO, OF THE YEAR UNDER CONSIDERATION. IT IS BROUGHT TO OUR NOTICE TH AT THIS ISSUE IS NO MORE RES-INTEGRA AS HONBLE BOMBAY HIGH COURT HAS ALREAD Y DECIDED THIS ISSUE IN MANY JUDGMENTS. LD. COUNSEL OF THE ASSESSEE HAS PLACED RELIANCE UPON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CA SES OF SOFTWORKS COMPUTERS PVT LTD (SUPRA) AND XYLON HOLDINGS PVT LT D (SUPRA) WHEREIN IT IS HELD THAT THE AMOUNT RECEIVED ON ACCOUNT OF SHARE C APITAL CAN NEITHER BE TREATED AS TAXABLE EITHER U/S 41(1) OR U/S 28(IV) I F THE SAME IS WRITTEN-BACK IN THE BOOKS OF ACCOUNT. WE SHALL DISCUSS HEREUNDER THE JUDGMENT IN THE CASE OF XYLON HOLDINGS PVT LTD (SUPRA) WHEREIN ONE OF THE QUESTIONS RAISED BY THE REVENUE BEFORE THE HONBLE HIGH COURT WAS W HETHER THE AMOUNT 13 ITA 235/MUM/2015 RECEIVED ON ACCOUNT OF SHARE APPLICATION MONEY AND WRITTEN-BACK IN THE BOOKS OF ACCOUNT CAN BE BROUGHT TO TAX U/S 41(1) OF THE ACT OR U/S 28(IV) OF THE ACT AS BUSINESS INCOME. HONBLE HIGH COURT DIS CUSSED THE ENTIRE LAW IN THIS REGARD AND HELD THE SAME IN THE NEGATIVE BY OBSERVING AS UNDER:- 8. WE HAVE CONSIDERED THE SUBMISSIONS. THE ISSUE A RISING IN THIS CASE STANDS COVERED BY THE DECISION OF THIS COURT I N THE MATTER OF MAHINDRA & MAHINDRA (SUPRA). THE DECISION OF THIS C OURT IN THE MATTER OF SOLID CONTAINERS (SUPRA) IS ON COMPLETELY DIFFERENT FACTS AND INAPPLICABLE TO THIS CASE. IN THE MATTER OF SOL ID CONTAINERS (SUPRA) THE ASSESSEE THEREIN HAD TAKEN A LOAN FOR B USINESS PURPOSE. IN VIEW OF THE CONSENT TERMS ARRIVED AT, T HE AMOUNT OF LOAN TAKEN WAS WAIVED BY THE LENDER. THE CASE OF TH E ASSESSEE THEREIN WAS THAT THE LOAN WAS A CAPITAL RECEIPT AND HAS NOT BEEN CLAIMED AS DEDUCTION FROM THE TAXABLE INCOME IN THE EARLIER YEARS AND WOULD NOT COME WITHIN THE PURVIEW OF SECTION 41 (1) OF THE ACT. HOWEVER, THIS COURT BY PLACING RELIANCE UPON THE DE CISION OF THE APEX COURT IN THE MATTER OF CIT V. T. V. SUNDARAM I YENGAR AND SONS LTD. 222 ITR 344 HELD THAT THE LOAN WAS RECEIV ED BY THE ASSESSEE FOR CARRYING ON ITS BUSINESS AND THEREFORE , NOT A LOAN TAKEN FOR THE PURCHASE OF CAPITAL ASSETS. CONSEQUEN TLY, THE DECISION OF THIS COURT IN THE MATTER OF MAHINDRA AN D MAHINDRA LIMITED (SUPRA) WAS DISTINGUISHED AS IN THE SAID CA SE THE LOAN WAS TAKEN FOR THE PURCHASE OF CAPITAL ASSETS AND NOT FO R TRADING ACTIVITIES AS IN THE CASE OF SOLID CONTAINERS LIMIT ED (SUPRA). IN VIEW OF THE ABOVE, THE DECISION OF THIS COURT IN TH E MATTER OF SOLID CONTAINERS LIMITED (SUPRA) WILL HAVE NO APPLICATION TO THE FACTS OF THE PRESENT CASE AND THE MATTER STANDS COVERED BY T HE DECISION OF THIS COURT IN THE MATTER OF MAHINDRA & MAHINDRA LIM ITED (SUPRA). THE ALTERNATIVE SUBMISSION THAT THE AMOUNT OF LOAN WRITTEN OFF WOULD BE TAXABLE UNDER SECTION 28(IV) OF THE ACT AL SO CAME UP FOR CONSIDERATION BEFORE THIS COURT IN THE MATTER OF MA HINDRA & MAHINDRA LIMITED (SUPRA) AND IT WAS HELD THEREIN TH AT SECTION 28(IV) OF THE ACT WOULD APPLY ONLY WHEN A BENEFIT O R PERQUISITE IS RECEIVED IN KIND AND HAS NO APPLICATION WHERE BENEF IT IS RECEIVED IN CASH OR MONEY. 9) IN VIEW OF THE ISSUE ARISING I N THIS APPEAL BEING COVERED BY THE DECISION OF THIS COURT IN THE MATTER OF MAHINDRA & MAHINDRA LTD.(SUPRA), NO SUBSTANTIAL QUE STION OF LAW ARISES AND BOTH THE QUESTIONS ARE DISMISSED. 19. F ROM THE ABOVE, IT MAY BE NOTED THAT HONBLE HIGH COURT HAS CONSIDE RED ITS EARLIER JUDGMENT IN THE CASE OF SOLID CONTAINERS (SUPRA) AS WELL AS THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF T. V. SUNDARAM IYENGAR & SONS LTD (SUPRA) AND HELD THAT THE AMOUNT RECEIVED ON ACCOUNT OF SHARE APPLICATION MONEY CANNOT BE BROUGH T TO TAX AS INCOME U/S 41(1) OR U/S 28(IV). 20. IT IS FURTHER N OTED THAT SIMILAR VIEW HAS BEEN TAKEN BY HONBLE MADRAS HIGH COURT IN THE CASE OF SKRAEMECO REGENT LTD (312 ITR 317) WHEREIN DETAILED DISCUSSION WAS MADE ON SECTION 28(IV) AS WELL AS SECTION 41(1) AND IT WAS HELD THAT AMOUNT RECEIVED FOR THE PURPOSE OF ACQUIR ING CAPITAL 14 ITA 235/MUM/2015 ASSET DID NOT CONSTITUTE TRADING LIABILITY, AND THE REFORE, THE SAME WAS NOT TAXABLE U/S 41(1) OR SECTION 28(IV) OF THE ACT. IT IS FURTHER NOTED THAT HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS TOSHA INTERNATIONAL LTD 331 ITR 440 ADOPTED THE SAME VIEW AFTER CONSIDERING THE JUDGMENT OF HONBLE BOMBAY HIGH COU RT IN THE CASE OF MAHINDRA & MAHINDRA LTD (SUPRA). THUS, FROM THE AFORESAID LEGAL DISCUSSION AND FACTS OF THE CASE BE FORE US, WE FIND THAT THE ORDER PASSED BY THE LD. CIT(A) IS WELL REA SONED AND BASED ON CORRECT LEGAL POSITION AND, THEREFORE, NO INTERFERENCE IS CALLED FOR IN HIS ORDER. THUS, THE SAME IS UPHELD. GROUND RAISED BY THE REVENUE IS DISMISSED. 19. FROM THE ABOVE, IT MAY BE NOTED THAT HON'BLE HIGH C OURT HAS CONSIDERED ITS EARLIER JUDGMENT IN THE CASE OF SOLI D CONTAINERS (SUPRA) AS WELL AS THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CAS E OF T.V. SUNDARAM LYENGAR & SONS LTD (SUPRA) AND HELD THAT THE AMOUNT RECEIVED ON ACCOUNT OF SHARE APPLICATION MONEY CANNOT BE BROUGHT TO TAX AS INCOME U/S 41(1) OR U/S 28(IV). 20. IT IS FURTHER NOTED THAT SIMILAR VIEW HAS BEEN TAKE N BY HON'BLE MADRAS HIGH COURT IN THE CASE OF SKRAEMECO REGENT LTD (312 ITR 317) WHEREIN DETAILED DISCUSSION WAS MADE ON SECTION 28(IV) AS W ELL AS SECTION 41(1) AND IT WAS HELD THAT AMOUNT RECEIVED FOR THE PURPOSE OF AC QUIRING CAPITAL ASSET DID NOT CONSTITUTE TRADING LIABILITY, AND THEREFORE, TH E SAME WAS NOT TAXABLE U/S 41(1) OR SECTION 28(IV) OF THE ACT. IT IS FURTHER N OTED THAT HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS TOSHA INTERNATIONAL LTD 331 ITR 440 ADOPTED THE SAME VIEW AFTER CONSIDERING THE JUDGMENT OF HON 'BLE BOMBAY HIGH COURT IN THE CASE OF MAHINDRA & MAHINDRA LTD (SUPRA). THU S, FROM THE AFORESAID LEGAL DISCUSSION AND FACTS OF THE CASE BEFORE US, W E FIND THAT THE ORDER PASSED BY THE LD. CIT(A) IS WELL REASONED AND BASED ON COR RECT LEGAL POSITION AND, THEREFORE, NO INTERFERENCE IS CALLED FOR IN HIS ORD ER. THUS, THE SAME IS UPHELD. GROUND RAISED BY THE REVENUE IS DISMISSED. 10. IN THIS CASE, FACTS ARE IDENTICAL TO THE CASE A LREADY CONSIDERED BY THE CO-ORDINATE BENCH IN THE CASE OF NALWA CHROME P VT LTD. THE AO HAS MADE ADDITION TOWARDS REDEEMABLE NON CUMULATIVE PREFERENCE SHARES U/S 28(IV) OF THE INCOME-TAX ACT, 1961. SIN CE, THE CO-ORDINATE BENCH HAS ALREADY TAKEN A VIEW THAT SHARE CAPITAL R ECEIPT CANNOT BE TAXED EITHER U/S 28(IV) OR 41(1) OF THE ACT. THERE FORE, BEING CONSISTENT WITH THE VIEW TAKEN BY THE CO-ORDINATE BENCH, WE AR E OF THE CONSIDERED 15 ITA 235/MUM/2015 VIEW THAT WRITE BACK OF PREFERENCE SHARE CAPITAL CA NNOT BE TAXED U/S 28(IV) OF THE INCOME-TAX ACT, 1961. THE LD.CIT(A), AFTER CONSIDERING RELEVANT FACTS HAS RIGHTLY DELETED ADDITION MADE BY THE AO. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE CIT(A). HENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS OF CIT(A) AND DISMISS THE APPEA L FILED BY THE REVENUE. 11. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH JULY, 2018. SD/- SD/- (JOGINDER SINGH) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 18 TH JULY, 2018 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER SR.PS, ITAT, MUMBAI