Venturetech Solutions Pvt. Ltd., CHENNAI V. DCIT, CHENNAI

ITA 751/CHNY/2014

• Counselvise Citation: 75121714 RSA 2014
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 15-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 27-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: MANUEL THOMAS
• Section: 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.751/MDS/2014 ( )( / ASSESSMENT YEAR : 2009-10 M/S VENTURETECH SOLUTIONS PVT. LTD., NO.4, JOSIER STREET, NUNGAMBAKKAM, CHENNAI - 600 034. PAN : AABCV 2359 K V. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE III(4), CHENNAI - 600 034. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI MANUEL THOMAS, CA -.+, / 0 / RESPONDENT BY : SHRI S. DAS GUPTA, JCIT 1 / 2% / DATE OF HEARING : 15.04.2015 3') / 2% / DATE OF PRONOUNCEMENT : 17.04.2015 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, CHENN AI, DATED 15.11.2013 AND PERTAINS TO ASSESSMENT YEAR 2009-10. 2 I.T.A. NO.751/MDS/14 2. SHRI MANUEL THOMAS, THE LD. REPRESENTATIVE OF TH E ASSESSEE, SUBMITTED THAT THE FIRST ISSUE ARISES FOR CONSIDERA TION IS ADDITION MADE BY THE ASSESSING OFFICER TO THE EXTENT OF ` 59,87,748/- UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'T HE ACT'). ACCORDING TO THE LD. REPRESENTATIVE, VENTURE TECH A SSETS LIMITED, A COMPANY REGISTERED IN UNITED KINGDOM, PROPOSED TO I NVEST IN EQUITY SHARES OF THE ASSESSEE-COMPANY. THE VALUE OF THE A SSESSEE- COMPANY WAS MADE ON THE ASSETS BY THE AUDITORS OF T HE ASSESSEE- COMPANY AND IT WAS VALUED AT ` 522 PER EQUITY SHARE, AS ON 31.03.2004. ACCORDING TO THE LD. REPRESENTATIVE, T HE CHARTERED ACCOUNTANTS FOLLOWED THE NET ASSET VALUE METHOD FOR VALUING THE SHARES. HOWEVER, THE ASSESSEE HAS RECEIVED A PREMI UM OF ` 535 PER SHARE. ACCORDING TO THE LD. REPRESENTATIVE, TH E DIFFERENCE BETWEEN THE VALUATION ESTIMATED BY THE CHARTERED AC COUNTANTS AT ` 522 AND THE ACTUAL AMOUNT RECEIVED BY THE ASSESSEE AT ` 535 PER SHARE, WAS TAKEN AS UNACCOUNTED MONEY UNDER SECTION 68 OF THE ACT. REFERRING TO SECTION 68 OF THE ACT, THE LD. R EPRESENTATIVE SUBMITTED THAT ADDITION UNDER SECTION 68 OF THE ACT WOULD BE MADE IN CASE THE ASSESSEE OFFERS NO EXPLANATION ABOUT TH E NATURE AND SOURCE OF THE MONEY CREDITED IN THE BOOKS OF ACCOUN T OR THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT SATISFAC TORY TO THE 3 I.T.A. NO.751/MDS/14 ASSESSING OFFICER. IN THIS CASE, IT IS NOT IN DISP UTE THAT MONEY RECEIVED BY THE ASSESSEE @ 535 PER SHARE IS FOR THE PURPOSE OF ALLOTTING SHARES OF THE COMPANY AT A PREMIUM RATE. SINCE THE SOURCE AND NATURE OF THE ASSET IS NOT IN DISPUTE, A CCORDING TO THE LD. REPRESENTATIVE, THE PROVISIONS OF SECTION 68 OF THE ACT IS NOT APPLICABLE. 3. ON THE CONTRARY, SHRI S. DAS GUPTA, THE LD. DEPA RTMENTAL REPRESENTATIVE, SUBMITTED THAT THE CHARTERED ACCOUN TANTS OF THE ASSESSEE-COMPANY VALUED THE SHARES AT ` 522 PER SHARE ON THE BASIS OF NET ASSET VALUE METHOD AND INVESTOR AT ` 535 PER SHARE. THE ASSESSING OFFICER TAXED THE DIFFERENCE BETWEEN THE VALUE ESTIMATED BY THE CHARTERED ACCOUNTANTS OF THE ASSES SEE-COMPANY ON THE BASIS OF NET ASSET VALUE METHOD AND THE MONE Y ACTUALLY INVESTED BY THE INVESTORS AS ON THE DATE OF THE ALL OTMENT. ACCORDING TO THE LD. REPRESENTATIVE, AS ON THE DATE OF ALLOTM ENT, THE ASSESSEE- COMPANY DID NOT HAVE SIFY SHARES. THEREFORE, TO TH AT EXTENT, THE VALUE PER SHARE WOULD HAVE TO BE REDUCED. LD. REPR ESENTATIVE SUBMITTED THAT PRUDENT INVESTORS WOULD INVEST ONLY IN CASE THEY ARE SURE ABOUT GROWTH PROSPECTS OF THE COMPANY IN FUTUR E. SINCE THE ASSESSEE HAS NOT EXPLAINED FOR INVESTING HIGHER RAT E THAN THE VALUE ESTIMATED BY THE CHARTERED ACCOUNTANTS, ACCORDING T O THE LD. D.R., 4 I.T.A. NO.751/MDS/14 THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE HAVE A LSO GONE THROUGH THE PROVISIONS OF SECTION 68 OF THE ACT. S ECTION 68 OF THE ACT READS AS FOLLOWS:- 68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXCLUSION ABOUT THE NATURE AND SOURCE THE REOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION O F THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITE D MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR; THE FOLLOWING PROVISOS SHALL BE INSERTED IN SECTION 68 BY THE FINANCE ACT, 2012, W.E.F. 1.4.2013: PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY, (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTER ESTED) AND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATION M ONEY, SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATEV ER NAME CALLED, ANY EXPLANATION OFFERED BY SUCH ASSESSEE-CO MPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNLESS (A) THE PERSON, BEING A RESIDENT IN WHOSE NAME SUC H CREDIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALS O OFFERS AN EXPLANATION ABOUT THE NATURE AND SOURCE O F SUCH SUM SO CREDITED; AND (B) SUCH EXPLANATION IN THE OPINION OF THE ASSESSI NG OFFICER AFORESAID HAS BEEN FOUND TO BE SATISFACTORY ; PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IF THE PERSON, IN WHOSE NAME THE SUM RE FERRED TO THEREIN IS RECORDED, IS A VENTURE CAPITAL FUND OR A VENTURE CAPITAL COMPANY AS REFERRED TO IN CLAUSE (23FB) OF SECTION 10. 5 I.T.A. NO.751/MDS/14 A BARE READING OF SECTION 68 OF THE ACT CLEARLY SHO WS THAT IN CASE THE ASSESSEE OFFERS NO EXPLANATION OR THE EXPLANATI ON OFFERED BY THE ASSESSEE IS NOT SATISFACTORY, THE SUM CREDITED IN T HE BOOKS OF ACCOUNT MAY BE CHARGED TO TAX AS INCOME OF THE ASSE SSEE. IN THIS CASE, IT IS NOT IN DISPUTE THAT THE DIFFERENCE BETW EEN THE VALUE MADE BY THE CHARTERED ACCOUNTANTS TOWARDS VALUE OF SHARE S AT ` 522 PER SHARE AND THE ACTUAL INVESTMENT MADE BY THE INVESTO RS IN A COMPANY REGISTERED IN UNITED KINGDOM, IS FOR THE PU RPOSE OF MAKING INVESTMENT IN THE EQUITY SHARES OF THE ASSESSEE-COM PANY. THE NATURE IS FOR THE PURPOSE OF PURCHASE THE SHARES OF THE COMPANY AND THE SOURCE IS THE COMPANY, WHICH INTENDED TO PU RCHASE THE SHARES, ACTUALLY INVESTED THE MONEY. THESE FACTS A RE NOT IN DISPUTE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE PROVISIONS OF SECTION 68 OF THE ACT IS NOT APPLICABLE IN THE FACT S OF THE CASE. IN OTHER WORDS, THERE CANNOT BE ANY ADDITION UNDER SEC TION 68 OF THE ACT. 5. WE ALSO FIND THAT THE PROVISOS IN SECTION 68 OF THE ACT WERE INSERTED BY FINANCE ACT, 2012 WITH EFFECT FROM 1.04 .2013. THE ASSESSMENT YEAR UNDER CONSIDERATION IS 2009-10. TH EREFORE, PRIMA FACIE , THE FIRST PROVISO INSERTED BY FINANCE ACT, 2012 W ITH EFFECT FROM 1.04.2013 IS NOT APPLICABLE FOR THE ASSESSMENT YEAR 2009-10, I.E. 6 I.T.A. NO.751/MDS/14 THE YEAR UNDER CONSIDERATION. EVEN OTHERWISE, THE F IRST PROVISO WOULD BE APPLICABLE ONLY IF THE INVESTOR IS A PERSO N, BEING A RESIDENT IN INDIA, IN WHOSE NAME THE CREDIT WAS RECORDED IN THE BOOKS OF ACCOUNT OF THE COMPANY, IS TO EXPLAIN HIS SOURCE OF INCOME. IN THOSE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSID ERED OPINION THAT THE ADDITION MADE BY THE ASSESSING OFFICER, AS CONF IRMED BY THE CIT(APPEALS), IS NOT JUSTIFIED. ACCORDINGLY, THE O RDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ADDITION MADE BY THE ASSESSING OFFICER TO THE EXTENT OF ` 59,87,748/- IS DELETED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED ON 17 TH OF APRIL, 2015 AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) (. !'# ! ) ( . . . ) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 17 TH APRIL, 2015. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-III, CHENNAI-34 4. 1 92 /CIT, CHENNAI-III, CHENNAI-34 5. 7: -2 /DR 6. ;( < /GF.