Asst. Commissioner of Income Tax, Central Circle-4, Hyderabad V. M/s Suguna Metals Private Limited, Hyderabad

ITA 438/HYD/2014

• Counselvise Citation: 43822514 RSA 2014
• Duration Of Justice: 1 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 15-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 14-03-2014
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Assessee Lawyers: B SAI PRASAD
• Keywords: Unexplained cash credit; Bogus Share capital; Business income; Search and seizure; Capital receipt
• Section: 56(2); 153A; 56; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NOS. 437 & 438/HYD/2014 ASSESSMENT YEARS: 2008-09 & 2009-10 ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4, HYDERABAD VS M/S. SUGUNA METALS PVT. LTD., BANJARA HILLS, HYDERABAD [PAN: AALCS0546B] (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI S. K. GUPTA, DR FOR ASSESSEE : SHRI B . SAI PRASAD, AR DATE OF HEARING : 15 - 0 9 - 2015 DATE OF PRONOUNCEMENT : 09 - 1 0 - 2015 O R D E R PER B. RAMAKOTAIAH, A.M. : THESE TWO APPEALS ARE BY REVENUE AGAINST THE COMMO N ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VI, HYDERA BAD DT. 27-11-2013 FOR AYS. 2008-09 & 2009-10 ON THE DE LETION OF SHARE PREMIUM BROUGHT TO TAX BY THE ASSESSING OFFICER (AO ) OF RS. 56,00,000/- AND RS. 1,35,00,000/-LAKHS RESPECTIVELY IN THE ABOV E ASSESSMENT YEARS. 2. BRIEFLY STATED, ASSESSEE, A PRIVATE LIMITED COMP ANY IS IN THE BUSINESS OF MANUFACTURING AND SALE OF M.S. BILLETS. IN THE GROUP CASES, THERE WAS SEARCH AND SEIZURE OPERATIONS CONDUCTED O N 29-01-2009. IN RESPONSE TO THE NOTICES U/S. 153A OF THE INCOME TAX ACT [ACT], RETURN OF I.T.A. NOS. 437 & 438/HYD/2014 M/S. SUGUNA METALS PVT LTD., :- 2 -: INCOMES WERE FILED DECLARING NIL INCOME FOR AY. 200 8-09 AND LOSS OF RS. 85,45,881/- FOR AY. 2009-10. AO IN THE COURSE O F ASSESSMENT PROCEEDINGS OBSERVED THAT ASSESSEE HAD RECEIVED SHA RE APPLICATION AMOUNT WITH RS. 40/- PREMIUM FROM THREE APPLICANTS IN AY. 2008-09. AO CALLED FOR THE DETAILS OF THE SHAREHOLDERS WHO H AD PAID PREMIUM ALONG WITH SHARE APPLICATION MONEY AND FROM THE DET AILS FURNISHED, AO FURTHER OBSERVED THAT OUT OF THE TOTAL CONTRIBUTORS TO SHARE CAPITAL, THREE CONTRIBUTORS I.E. M/S. BASUKNATH DEVELOPERS PVT. LT D., M/S.UPLINK VYAPAR PVT. LTD AND M/S. CORBAL SUPPLIERS PVT. LTD. , HAD PAID SHARE APPLICATION MONEY @ RS.10/- PER SHARE AND RS. 40/- TOWARDS PREMIUM PER SHARE, THUS FOR EACH SHARE THE PARTIES HAVE PAI D RS. 50/- IN TOTAL. IN RESPECT OF AY. 2009-10, AO OBSERVED FROM THE SCHEDU LE-II OF THE BALANCE SHEET, THAT UNDER THE HEAD 'RESERVES AND SURPLUSES' , THE APPELLANT HAD SHOWN AN AMOUNT OF RS. 1,35,00,000/- UNDER SHARE PR EMIUM ACCOUNT. ON VERIFICATION OF THE DETAILS FURNISHED IN RESPECT OF THE ABOVE, IT WAS OBSERVED BY THE AO THAT WHEN THE OTHER SHARE CONTRI BUTORS HAVE PAID RS. 10/- PER SHARE, FIVE COMPANIES VIZ., M/S. GYANE SHWAR TRADING AND FINANCE CO. LTD., M/S SIDH HOUSING DEVELOPMENT CO. LTD., M/S. ARTILLEGENCE BIO INNOVATIONS LTD., M/S CLIFTON SECU RITIES (P) LTD. AND M/S. OSHIN INVESTMENTS & FINANCE PVT. LTD., HAD PAI D RS. 10/- PER SHARE AND RS. 90/- TOWARDS PREMIUM, TOTALLING TO RS . 100/- PER SHARE. THUS, THE PREMIUM SO COLLECTED WAS ARRIVED AT RS. 5 6,00,000/- FOR THE AY. 2008-09 AND RS. 1,35,00,000/- FOR THE AY 2009-1 0 AND THE AO OBSERVED THAT THE ASSESSEE-COMPANY ADOPTED PICK AND CHOSE POLICY FOR COLLECTION OF SHARE PREMIUM AND DID NOT ADOPT UNIFO RM POLICY AND OUT OF ALL THE CONTRIBUTORS FOR THE SHARES, ONLY THREE PAR TIES FOR THE AY. 2008-09 AND FIVE PARTIES FOR THE AY 2009-10 HAVE PAID PREMI UM, AND THE METHOD OF WORKING OUT OF THE PREMIUM WAS NOT EXPLAINED BY ASSESSEE. IT WAS ALSO REMARKED THAT ASSESSEE IS A CLOSELY HELD COMPA NY AND HAD COMMENCED ITS PRODUCTION ONLY IN DECEMBER, 2008 AND THE FIRST BALANCE SHEET OF THE COMPANY WAS PREPARED ON 31-03-2008 AND IT IS NOT CLEAR AS TO HOW THE AMOUNTS CONTRIBUTED TO SHARE PREMIUM HAS BEEN WORKED OUT AND BROUGHT IN TO THE BOOKS SUBSEQUENT TO CLOSURE O F THE ACCOUNTING I.T.A. NOS. 437 & 438/HYD/2014 M/S. SUGUNA METALS PVT LTD., :- 3 -: YEAR. THUS, THE AO CONCLUDED THAT ASSESSEE HAD CHOS EN A COLOURFUL DEVISE FOR COLLECTING EXTRA MONEY IN THE FORM OF PR EMIUM ON THE SHARES AND THE EXTRA AMOUNT RECEIVED AS SHARE APPLICATION IS NOTHING BUT A DEVISE TO AVOID TAX. AO FURTHER OPINED THAT THERE CANNOT BE ANY PREMIUM WHEN THE COMPANY IS JUST IN FORMATIVE STAGE AND YET TO PREPARE ITS BALANCE SHEET AFTER COMMENCEMENT OF PRODUCTION AND THAT THERE CANNOT BE DISTINCTIVE SHARE APPLICATION MONEYS FOR DIFFERENT GROUPS. AO HAD THUS BROUGHT TO TAX THE SHARE PREMIUMS OF RS. 5 6,00,000/- FOR THE AY. 2008-09 AND RS.1,35,00,000/- FOR THE AY. 2009-1 0, TO TAX, AS INCOME FROM OTHER SOURCES, BY TREATING THE AMOUNT S AS TRADE RECEIPTS. 3. BEFORE THE LD. CIT(A), ASSESSEE OBJECTED TO SUCH ADDITIONS AND SUBMITTED THAT OUT OF TOTAL 42 SUBSCRIBERS, ONLY 8 HAVE TAKEN THE SHARES ON PREMIUM AND DETAILS FOR ASSESSMENT YEAR-WISE FUR NISHED ON TO CIT(A) ARE AS UNDER: NAME AY. NO. OF SHARES SHARE CAPITAL PREMIUM TOTAL BSUKNATH DEVELOPERS P LTD 2008-09 40,000 4,00,000 16,00,000 20,00,000 UPLINK VYAPAR PVT. LTD 2008-09 40,000 4,00,000 16,00,000 20,00,000 CORBAL SUPPLIERS PVT. LTD 2008-09 60,000 6,00,000 24,00,000 30,00,000 TOTAL: 14,00,000 56,00,000 70,00,000 GYANESWAR TRADING & FINANCE CO.LTD 2009-10 56,250 5,62,500 22,50,000 28,12,500 SINDH HOUSING DEVELOPMENT CO. LTD 2009-10 56,250 5,62,500 22,50,000 28,12,500 ARTILENGENCE BIO INNOVATIONS LTD 2009-10 56,250 5,62,500 22,50,000 28,12,500 CLIFFON SECURITIES (P) L 2009-10 56,250 5,62,500 22,50,000 28,12,500 OSHIN INVESTMENTS AND FINANCE PVT. LTD., 2009-10 1,12,500 11,25,000 45,00,000 56,25,000 TOTAL: 15,00,000 1,35,00,000 1,50,00,000 I.T.A. NOS. 437 & 438/HYD/2014 M/S. SUGUNA METALS PVT LTD., :- 4 -: 4. IT WAS CONTENDED THAT ALL THE PERSONS WHO CONTRI BUTED THE MONEY HAVE CONFIRMED THE AMOUNTS WITH THE DETAILS OF BANK ACCOUNT, PAN, INCOME TAX DETAILS, PAYMENTS OF MONEY ALONG WITH IN TIMATION GIVEN ON ALLOTMENT OF SHARES TO THE REGISTRAR OF COMPANIES. IT WAS FURTHER CONTENDED THAT AO DID NOT DISPUTE THE GENUINENESS O F INVESTMENT BUT ONLY CHOSEN TO TREAT THE RECEIPT OF SHARE PREMIUM A S INCOME FROM OTHER SOURCES WITHOUT INVOKING PROVISIONS OF SECTION 68. ASSESSEE FURTHER CONTENDED THAT MONEY RAISED REPRESENT SHARE CAPITAL AND IT WILL BE CAPITAL IN NATURE AND IT WOULD NOT CONSTITUTE INCOM E OF ASSESSEE MERELY BECAUSE THE SHARES WERE SOLD AT PREMIUM. IT RELIED ON THE FOLLOWING JUDICIAL DECISIONS THAT SHARE PREMIUMS RECEIVED CON STITUTE CAPITAL RECEIPTS: A. ADDL. CIT VS. OM OILS & OIL SEEDS EXCHANGE LIMITED [152 ITR 552] (DEL); AND B. CIT VS. KISHNAROM BALADEO BANK (P) LTD., [144 ITR 6 00] (MP) 5. IT WAS FURTHER CONTENDED THAT THE PROVISIONS OF SECTION 56 ARE EFFECTIVE W.E.F. 01-04-2013 AND SO THEY ARE ALSO NO T APPLICABLE FOR THE YEARS UNDER CONSIDERATION. THE MATTER WAS REFERRED TO AO BY THE CIT(A) AND ON HIS REMAND REPORT, ASSESSEE FILED ITS REJOI NDER. AFTER CONSIDERING THE DETAILED EXPLANATION OF THE PARTIES, LD. CIT(A) ANALYZED THE ISSUE KEEPING IN VIEW THE FACTS AND LAW ON THE SUBJECT AN D DELETED THE SAME BY HIS ORDER IN PARA 5.5 TO 5.8 STATING AS UNDER: 5.5. PERUSED THE SUBMISSIONS OF THE APPELLANT AND THE OBSERVATIONS OF THE AO BOTH DURING ASSESSMENT AS WE LL AS THE REMAND PROCEEDINGS. AS COULD BE SEEN FROM THE FACTS OF THE CASE, THE APPELLANT COMPANY COLLECTED SHARE PREMIUM AT SE PARATE RATES AND FROM SELECTED PARTIES, DURING THE TWO ASSESSMEN T YEARS UNDER REFERENCE, PRESUMABLY BASED ON THE VALUATION MADE B Y THE ASSESSEE. THE SAID SHARE PREMIUM ALONG WITH THE SHA RE APPLICATION MONEY WAS RECEIVED THROUGH BANKING CHANNELS AND THE SAME HAVE BEEN CONFIRMED BY THE INVESTING PARTIES. THERE IS N O DISPUTE ON THESE FACTS. IT WAS ALSO A FACT THAT THERE WAS SEAR CH AND SEIZURE I.T.A. NOS. 437 & 438/HYD/2014 M/S. SUGUNA METALS PVT LTD., :- 5 -: PROCEEDINGS CONDUCTED IN THIS CASE DURING WHICH NO INCRIMINATING INFORMATION RELATED TO THESE TRANSACTIONS WERE MENT IONED TO HAVE BEEN TRACED/FOUND. IT IS ALSO A FACT THAT EITHER DU RING THE POST SEARCH PROCEEDINGS AND THE ASSESSMENT PROCEEDINGS, NO ENQUIRIES WERE SHOWN TO HAVE BEEN CAUSED OR INVESTIGATED, TO EXAMINE THE COLOURFUL DEVICE OF COLLECTING THE SHARE PREMIUM. I T MAY BE FURTHER RELEVANT TO OBSERVE THAT THE AO HAS NEVER DOUBTED T HE INVESTMENT IN THE FORM OF SHARE APPLICATION MONEY OR SHARE EQUITY , BY THE SAID INVESTORS, BUT ONLY DOUBTED THE GENUINENESS OF THE SHARE PREMIUM, BY QUESTIONING THE BASIS OF COLLECTING THE PREMIUM, THAT TOO BASED ON SURMISES AND PRESUMPTIONS,. IT IS NOT CLEAR AS TO H OW THE SHARE PREMIUM FROM THE PARTIES COULD BE QUESTIONED WITHOU T DOUBTING THE GENUINENESS OF TRANSACTION RELATED TO THE SHARE APP LICATION MONEY RECEIVED FROM THE SAME PARTIES. THIS CLEARLY INDICA TE THAT THE AO INTENDED TO TREAT THE SAID SHARE PREMIUM AS BUSINES S RECEIPT AND INCOME FROM OTHER SOURCES AND ACCORDINGLY THE AO AS SESSED SUCH AMOUNTS AS INCOME FROM OTHER SOURCES. HENCE, QUESTI ON OF EXAMINING THE GENUINENESS OF SOURCES OF INVESTMENTS AND TREATING THE SAME AS UNEXPLAINED CREDITS, DID NOT ARISE AT T HE STAGE OF ASSESSMENT AND FOR THE SAME REASONS TREATING THE SA ME AS UNEXPLAINED CREDIT, AT THIS STAGE, MAY NOT SERVE AN Y PURPOSE. AS SUCH THE RECEIPTS OF SHARE PREMIA, NEED TO BE EXAMI NED FROM THE POINT OF IT'S TAXABILITY AS REVENUE RECEIPT AND AS INCOME FROM OTHER SOURCES, AS AGAINST THE CLAIM OF THE APPELLANT AS C APITAL RECEIPT, WHILE EXAMINING THE PROVISIONS UNDER WHICH SUCH AMO UNTS CAN BE TAXED. 5.6. REGARDING THE TAXABILITY OF THE SAID SHARE P REMIUM AS INCOME FROM OTHER SOURCES, THE CONTENTION OF THE AP PELLANT WAS THAT IT WAS OUTSIDE THE SCOPE OF TAXING PROVISIONS, SINC E THE INTENDED AMENDMENT TO SEC. 56(2) IS ONLY OPERATIVE FROM 01.0 4.2013, AS SUCH THE SHARE PREMIUM COLLECTED FOR THE AY 2008-09 AND AY 2009-10, ARE NOT WITHIN THE AMBIT OF PROPOSED AMENDMENT OF S EC. 56(2). THIS ARGUMENT OF THE APPELLANT APPEARS TO HAVE CONSIDERA BLE FORCE AND IS WELL SUPPORTED BY DECISION OF ITAT, HYDERABAD IN AP PEAL NO. IN ITA NO. 647/HYD/2011 AND IT NO. 135/HYD/2013 DATED 24.0 5.2013, WHEREIN THE HON'BLE ITAT, OBSERVED AS UNDER': 'THE SHARE PREMIUM CANNOT BE BROUGHT TO TAX AS IT I S A CAPITAL RECEIPT AND NOT ON REVENUE ACCOUNT. PROVISIONS OF S EC. 56(2) ARE AMENDED BY THE FINANCE ACT, 2012, SO AS TO CONSIDER THE UNREASONABLE PREMIUM AS INCOME IS EFFECTIVE FROM 01-04-2013. HOW EVER, WITHOUT ANY ALLEGATION OF FRAUD OR QUID PRO QUO FOR ANY ILLEGAL TRANSACTION OR ANY TYPE OF UNJUST ENRICHMENT OR WITHOUT ANY JUSTIFICAT ION FOR RECEIVING SO MUCH PREMIUM, IN THE ABSENCE OF LEGAL PROVISION THE CAPITAL RECEIPT ON PREMIUM ACCOUNT CANNOT BE CONSIDERED AS INCOME MADE OUT BY THE ASSESSING OFFICER. ' I.T.A. NOS. 437 & 438/HYD/2014 M/S. SUGUNA METALS PVT LTD., :- 6 -: 5.7. AS REGARD TO THE ISSUE OF TREATMENT OF SHARE PREMIUM AS CAPITAL OR REVENUE RECEIPT, IT WAS CONTENDED BY THE APPELLANT THAT THE AO FAILED TO PROVE THE NATURE OF SHARE PREMIUM TO BE REVENUE RECEIPT AND AO DID NOT DOUBT THE SOURCES FOR RECEIP TS OR GENUINENESS OF RECEIPTS, AS SHARE CAPITAL AS WELL AS SHARE PREM IUM. THE APPELLANT'S CONTENTION WAS FURTHER THAT THE FACTS O F THE CASE UNDER REFERENCE ARE SIMILAR TO THE FACTS OF JUDICIAL DECI SIONS BY HON'BLE DELHI COURT IN THE CASE OF ADDL.CIT VS. AM OILS AND OIL SEEDS EXCHANGE LTD. (152 ITR 552) AND THE DECISION OF HON 'BLE HIGH COURT OF MADHYA PRADESH IN THE CASE OF CIT VS. KRISHNARAM BALDEO BANK (P) LTD ( 144 ITR 600), WHEREIN THE HON'BLE HIGH CO URTS ARE OF THE OPINION THAT THE SHARE PREMIUM RECEIVED IS NOT TAXA BLE, OBSERVING THAT THE AMOUNT WAS NOT A REVENUE RECEIPT, TO BE IN CLUDED IN THE TOTAL INCOME OF THE ASSESSEE. IN THIS 'REGARD IT MA Y BE RELEVANT TO MENTION THAT THE HON'BLE ITAT, HYDERABAD A BENCH, W HILE DECIDING THE ISSUE IN APPEAL NO. 647/HYD/2011 AND APPEAL NO. 135/HYD/2013 (SUPRA) HAS ALSO RELIED UPON THE DECIS ION OF HIGH COURT OF DELHI IN THE CASE OF ADDL.CIT VS. AM OIL A ND OIL SEEDS COMPANY (SUPRA), IN DECIDING ON THE ISSUE OF SHARE PREMIUM AS A CAPITAL RECEIPT. THE OBSERVATION OF THE HON'BLE ITA T IS AS UNDER: 'IN THE CASE OF ADDL. CIT VIS. OM OIL AND OIL SEEDS COMPANY (152 ITR 552), THE HON'BLE DELHI HIGH COURT HELD TH AT THE SHARE PREMIUM RECEIVED WAS NOT TAXABLE, OBSERVING THAT TH E AMOUNTING WAS NOT A REVENUE RECEIPT INCLUDIBLE IN THE TOTAL INCOME O F THE ASSESSEE COMPANY. S. 78 OF THE COMPANIES ACT, 1956 TREATS THE PREMIUM AS A SPECIAL CLASS OF CAPITAL, THE DISTRIBUTION OF THE SHARE PREMIUM B Y WAY OF DIVIDEND WAS NOT PERMITTED AND IT IS TAKEN OUT OF CATEGORY OF DI VISIBLE PROFITS. S. LB ALSO PROVIDED FOR APPLICATION OF PREMIUM RECEIVED O N ISSUE OF SHARES AND THE PREMIUM HAD TO BE TRANSFERRED TO A CAPITAL ACCO UNT CALLED SHARE PREMIUM ACCOUNT. AS PER THE PROVISIONS OF THE COMPA NIES ACT, THE AMOUNT RECEIVED BY THE ASSESSEE AS SHARE PREMIUM RE QUIRED TO BE CREDITED IN THE SHARE PREMIUM ACCOUNTS ONLY. SINCE IT IS A C APITAL RECEIVED ON PAR WITH THE SHARE CAPITAL RECEIVED, THE SAME CANNOT BE TREATED AS A REVENUE RECEIPT. IN FACT, HON'BLE DELHI HIGH COURT IN THE C ASE CITED ABOVE, ALSO GAVE A FINDING THAT THE AMOUNT CANNOT BE CONSIDERED AS A BUSINESS RECEIPT, AS THE AMOUNT WAS BROUGHT TO TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. SIMILAR FACTS EXISTED IN THE CASE A LSO AS THE ASSESSEE HAS NOT COMMENCED BUSINESS ACTIVITY IN THE IMPUGNED ASS ESSMENT YEAR AND THE AO BROUGHT THE AMOUNT TO TAX AS THE INCOME FROM OTHER SOURCES ONLY, WITHOUT SPECIFYING THE SECTION UNDER WHICH THE SAME WAS CONSIDERED AS INCOME. THEREFORE, BOTH ON FACTS AND ON IAW, THE AM OUNT OF SHARE PREMIUM HAS TO BE CONSIDERED AS CAPITAL RECEIPT, WH ICH CANNOT BE BROUGHT TO TAX IN THE IMPUGNED ASSESSMENT YEAR. ACCORDINGLY , THE ASSESSEE'S GROUNDS ARE ALLOWED AND THE AO IS DIRECTED TO DELET E THE ADDITION MADE KIN THAT BEHALF.' I.T.A. NOS. 437 & 438/HYD/2014 M/S. SUGUNA METALS PVT LTD., :- 7 -: 5.8 THUS, BASED ON THE FACTS OF THE CASE IT MAY B E RELEVANT TO CONCLUDE THAT, WHILE ACCEPTING THE SHARE CAPITAL , IT IS UNREASONABLE FOR THE AO TO HOLD THE SHARE PREMIUM A S UNACCOUNTED TRADE RECEIPTS, WITHOUT ANY ADVERSE FINDINGS TO THA T EXTENT. FURTHER, BASED ON THE JUDICIAL DECISIONS OF HON'BLE ITAT , H YDERABAD, ON SIMILAR FACTS (SUPRA), THE SHARE PREMIUM CANNOT BE TREATED AS INCOME FROM OTHER SOURCES, SINCE THE INTENDED AMEND MENT TO THE LEGISLATION, FOR TAXING THE SHARE PREMIUM AS OTHER INCOME, IS EFFECTIVE FROM 01.04.2013, BUT NOT APPLICABLE FOR T HE AY 2008-09 AND 2009-10. SIMILARLY, THE SHARE PREMIUM CANNOT BE TREATED AS REVENUE RECEIPT, TO BE INCLUDED IN TAXABLE INCOME, SINCE THE SAME HAS BEEN HELD TO BE TREATED AS CAPITAL RECEIPT, AS PER THE DECISION OF ITAT, HYDERABAD, WHO IN TURN RELIED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF ADDL.CIT VS. OM OIL AND O IL SEEDS EXCHANGE LTD. (SUPRA). THUS, BASED ON THE FACTS AS WELL AS THE JUDICIAL DECISIONS, I AM OF THE CONSIDERED OPINION THAT THE SHARE PREMIUM OF RS. 56,00,000/- AND RS. 1,35,00,000/- WH ICH WERE TREATED AS INCOME FROM OTHER SOURCES TO BE INCLUDED IN THE TOTAL INCOME OF THE APPELLANT FOR THE AYS 2008-09 AND 200 9-10, RESPECTIVELY, ARE NOT SUSTAINABLE. ACCORDINGLY, THE ADDITIONS ARE ORDERED TO BE DELETED. 6. LD. DR RELIED ON THE ORDERS OF AO, WHEREAS LD. C OUNSEL RELIED ON THE ORDER OF CIT(A). IT WAS FURTHER SUBMITTED THAT SIMILAR ISSUE WAS ALSO DECIDED BY THE HONBLE BOMBAY HIGH COURT IN THE CAS E OF VODAFONE INDIA SERVICES (P) LTD VS. UNION OF INDIA [2014] 368 ITR 1 (BOMBAY), DATED 10- 10-2014. 7. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE FA CTS ON RECORD. THE ONLY ISSUE INVOLVED IN THIS CASE IN BOTH THE AS SESSMENT YEARS IS TREATMENT OF SHARE PREMIUM RECEIPTS, WHETHER IT IS CAPITAL OR REVENUE RECEIPT. AS CAN BE SEEN FROM THE ABOVE, WHILE DELE TING THE ADDITION LD. CIT(A) IMPLICITLY FOLLOWED THE DECISION OF HYDERABA D BENCH OF ITAT IN THE CASE OF M/S. PVP VENTURES LIMITED, HYDERABAD IN ITA NOS. 647/HYD/2011 & 135/HYD/2013, WHEREIN IT WAS HELD TH AT THE RECEIPT AS SHARE PREMIUM IS A CAPITAL RECEIPT AND CANNOT BE CO NSIDERED AS REVENUE RECEIPT. IN FACT THE ITAT IN THE ABOVE SAID DECISI ON ALSO HELD THAT: I.T.A. NOS. 437 & 438/HYD/2014 M/S. SUGUNA METALS PVT LTD., :- 8 -: THE SHARE PREMIUM CANNOT BE BROUGHT TO TAX AS IT IS A CAPITAL RECEIPT AND NOT ON REVENUE ACCOUNT. PROVIS IONS OF S.56(2) ARE AMENDED BY THE FINANCE ACT, 2012, SO AS TO CONSIDER THE UNREASONABLE PREMIUM AS INCOME IS EFFECTIVE FROM 01 .04.2013. HOWEVER, WITHOUT ANY ALLEGATION OF FRAUD OR QUID PR O QUO FOR ANY ILLEGAL TRANSACTION OR ANY TYPE OF UNJUST ENRICHMEN T OR WITHOUT ANY JUSTIFICATION FOR RECEIVING SO MUCH PREMIUM, IN THE ABSENCE OF LEGAL PROVISION THE CAPITAL RECEIPT ON PREMIUM ACCOUNT BE CONSIDERED AS INCOME AS MADE OUT BY THE ASSESSING OFFICER AND THE CIT(A). 8. FURTHER, THE SAME ISSUE WAS ALSO CONSIDERED BY T HE CO-ORDINATE BENCH AT MUMBAI IN THE CASE OF M/S. GREEN INFRA LTD . VS. ITO IN ITA NO. 7762/MUM/2012, DT. 23-08-2013, WHEREIN ALSO ON A SI MILAR ISSUE, IT WAS CONSIDERED NOT TAXABLE. 9. HONBLE BOMBAY HIGH COURT IN THE CASE OF VODAFON E INDIA SERVICES (P) LTD VS. UNION OF INDIA [2014] 368 ITR 1 (BOMBAY ) (SUPRA) HELD THAT: THE WORD INCOME FOR THE PURPOSE OF THE ACT HAS A WELL UNDERSTOOD MEANING AS DEFINED IN SECTION 2(24) OF T HE ACT. THIS EVEN WHEN THE DEFINITION IN SEC. 2(24) OF THE ACT I S AN INCLUSIVE DECISION. IT CANNOT BE DISPUTED THAT INCOME WILL N OT IN ITS NORMAL MEANING INCLUDE CAPITAL RECEIPTS UNLESS IT IS SO SP ECIFIED, AS IN SECTION 2(24)(VI) OF THE ACT. . THE AMOUNTS RECE IVED ON ISSUE OF SHARE CAPITAL INCLUDING THE PREMIUM IS UNDOUBTEDLY ON CAPITAL ACCOUNT. SHARE PREMIUM HAVE BEEN MADE TAXABLE BY A LEGAL FICTION UNDER SECTION 56(2)(XVI) OF THE ACT (WITH EFFECT FR OM APRIL 1, 2013). THEREFORE ABSENT EXPRESS LEGISLATION, N O AMOUNT RECEIVED, ACCRUED OR ARISING ON CAPITAL ACCOUNT TRA NSACTION CAN BE SUBJECTED TO TAX AS INCOME. THIS IS SETTLED BY THE DECISION OF THIS COURT IN CADELL WEAVING MILL CO P LTD VS. CIT (249 ITR 265 BOM) WAS UPHELD BY THE APEX COURT IN CIT VS. D.P.SANDU C HEMBUR (P) LTD (273 ITR 1 SC). IN VIEW OF THE ABOVE, WE FIND CONSIDERABLE SUBSTANC E IN THE PETITIONERS CASE THAT NEITHER THE CAPITAL RECEIPTS RECEIVED BY THE PETITIONER ON ISSUE OF EQUITY SHARES TO ITS HOLDING COMPANY, A NON RESIDENT ENTITY, NOR THE ALLEGED SHORT FALL BETWEEN THE SO CALLED FAIR MARKET PRICE OF ITS EQUITY SHARES AND THE ISSUE PRI CE OF THE EQUITY SHARES CAN BE CONSIDERED AS INCOME WITHIN THE MEANI NG OF EXPRESSION AS DEFINED UNDER THE ACT. IN VIEW OF THE ABOVE, WE AGREE WITH THE ORDER OF LD . CIT(A) I.T.A. NOS. 437 & 438/HYD/2014 M/S. SUGUNA METALS PVT LTD., :- 9 -: 10. LD. DR IN THE COURSE OF ARGUMENTS PLACED ON REC ORD, THE ORDER OF THE ITAT, KOLKATA IN THE CASE OF BISAKHA SALES PVT LTD., KOLKATA VS. CIT IN ITA NO. 1493/KOL/2013 DT. 19-09-2014 FOR THE PRO POSITION THAT SHARE PREMIUM CAN BE BROUGHT TO TAX. AFTER PERUSING THE ABOVE ORDER, WE ARE OF THE OPINION THAT THE FACTS IN THE SAID CASE DOES NOT APPLY TO THE FACTS OF ASSESSEE. IN FACT IN THE ABOVE REFERRED CASE, T HE CO-ORDINATE BENCH AT CALCUTTA HAS ANALYSED THE MODUS OPERANDI FOLLOWED BY THAT ASSESSEE IN MAKING BOGUS ENTRIES AND HELPING MANY PEOPLE IN CON VERSION OF THEIR UNACCOUNTED MONEY INTO ACCOUNTED TRANSACTIONS AND A VAILING THE SCHEME OF SHARE PREMIUM. MOREOVER, THAT ORDER IS G IVEN IN THE CONTEXT OF PROCEEDINGS U/S. 263, WHEREIN LD. CIT WAS OF THE OPINION THAT ADEQUATE ENQUIRIES WERE NOT CONDUCTED BY AO AND THE WHOLE SCHEME OF THE CASE TO INDICATE THAT THOSE TRANSACTIONS ARE SU SPECT TRANSACTIONS. VIDE PARA 7, THE ITAT HAS NOTICED THAT PERUSING OF THE ORDER OF THE LD. CIT PASSED U/S. 263 SHOWS THAT ON THE BASIS OF SUBS TANTIAL INFORMATION AVAILABLE TO HER THAT THERE WERE NUMEROUS COMPANIES WHICH WERE CREATED WITH BOGUS SHARE CAPITAL FOR THE PURPOSE OF MONEY L AUNDERING, LD. CIT HAS CALLED FOR RECORDS AND HAS AFTER DUE VERIFICATI ON ISSUED SHOW CAUSE NOTICE TO ASSESSEE PERUSING THE ORDER OF LD. CIT FURTHER SHOWS THAT THERE ARE NUMBER OF COMPANIES IN THIS REGARD DOING THE BUSINESS OF MONEY LAUNDERING UNDER THE GUISE OF SHARE CAPITAL I NTRODUCTION. ON THE PECULIAR SET OF FACTS AVAILABLE IN THAT COMPANY WHI CH ARE BASICALLY INTENDED TO MONEY LAUNDERING IN THE GUISE OF SHARE PREMIUM THAT ORDER WAS PASSED IN THE CONTEXT OF EXERCISING JURISDICTIO N U/S. 263. THEREFORE, THE FACTS IN THE SAID CASE DO NOT APPLY. MOREOVER, AS THE CO-ORDINATE BENCH AT HYDERABAD CONSIDERED IN THE CASE OF M/S. P VP VENTURES LIMITED VS. DY.CIT IN ITA NOS. 647/HYD/2011 AND 13 5/HYD/2013, DT. 24-05-2013, UNLESS THERE ARE ALLEGATIONS OF FRAUD, QUID PRO QUO FOR ANY ILLEGAL TRANSACTION OR ANY TYPE OF UNJUST ENRICHMEN T OR WITHOUT ANY JUSTIFICATION FOR RECEIVING SO MUCH PREMIUM, IN THE ABSENCE OF LEGAL PROVISIONS, THE CAPITAL RECEIPTS OF PREMIUM CANNOT BE CONSIDERED AS INCOME. THERE IS NO SUCH ALLEGATION IN THIS CASE A ND ACCORDINGLY, WE UPHOLD THE ORDER OF CIT. FOLLOWING THE DECISION OF CO-ORDINATE BENCHES I.T.A. NOS. 437 & 438/HYD/2014 M/S. SUGUNA METALS PVT LTD., :- 10 -: STATED SUPRA AND THE PRINCIPLES LAID DOWN BY THE H ONBLE BOMBAY HIGH COURT IN THE CASE OF VODAFONE INDIA SERVICES (P) L TD VS. UNION OF INDIA [2014] 368 ITR 1 (BOMBAY), WE ARE OF THE OPINION TH AT THERE IS NO MERIT IN REVENUES GROUNDS AND ACCORDINGLY THEY ARE REJEC TED. 11. IN THE RESULT, BOTH THE REVENUE APPEALS ARE DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH OCTOBER, 2015 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 09 TH OCTOBER, 2015 TNMM COPY TO : 1. DEPUTY COMMISSIONER OF INCOME TAX, (CENTRAL CIRC LE-4), 8 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2. M/S. SUGUNA METALS PVT. LTD., 8-2-686/K.26/5, RO AD NO. 12, BANJARA HILLS, HYDERABAD. 3. CIT(APPEALS)-VI, HYDERABAD. 4. CIT (CENTRAL), HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.