M/s Tracxn Technologies Private Limited , Bangalore V. Income Tax Officer Ward-7(1)(1), Bangalore

ITA 902/BANG/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4284 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-07-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 26-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Additional evidence; Fair market value; Set aside
• Section: 115JB

Judgement Text

ITA NO.902 /BANG/2019 PAGE 2 OF 6 YEAR UNDER CONSIDERATION, THE ASSESSEE ISSUED 10724 4 EQUITY SHARES HAVING FACE VALUE OF RE.1.00 EACH AT A PREMIUM OF R S.82.92 PER SHARE. ACCORDINGLY IT COLLECTED SHARE PREMIUM OF R S.82,92,756/- IN AGGREGATE. 3. THE AO NOTICED THAT THE ASSESSEE HAS CLAIME D ITSELF AS A START UP COMPANY. HE NOTICED THAT THE EXPRESSION START UP IS DEFINED IN THE NOTIFICATION NO.45/2016 F NO.173/103/2016 ITA-1 DATED 14.06.2016 ISSUED BY CBDT. AS PER THE SAID NOTIFIC ATION, START UP SHALL MEAN A COMPANY IN WHICH THE PUBLIC ARE NOT SU BSTANTIALLY INTERESTED AND WHICH FULFILS THE CONDITIONS SPECIFI ED IN THE NOTIFICATION OF GOVERNMENT OF INDIA, MINISTRY OF CO MMERCE AND INDUSTRY, DEPT OF INDUSTRIAL POLICY AND PROMOTION, NUMBER GSRI 80(E) DATED 17-02-2016, PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II. THE AO NOTICED FURTHER TH AT THE ABOVE SAID NOTIFICATION DATED 17.02.2016 OF DIPP, THAT THE STA RT UP, IN ORDER TO AVAIL TAX BENEFITS, SHALL BE REQUIRED TO OBTAIN A C ERTIFICATE OF AN ELIGIBLE BUSINESS FROM THE INTER-MINISTERIAL BOARD OF CERTIFICATION. 4. THE ASSESSEE DID NOT FURNISH ANY SUCH KIND OF CERTIFICATE BEFORE THE AO AND HENCE THE AO REJECTED THE CLAIM OF STAR T UP. THE ASSESSEE HAD VALUED THE SHARES UNDER DISCOUNTED CAS H FLOW (DCF) METHOD. THE AO TOOK THE VIEW THAT THE ASSESSEE SHO ULD HAVE DETERMINED FAIR MARKET VALUE OF SHARES UNDER NET W ORTH METHOD. ACCORDINGLY, THE AO TOOK THE VIEW THAT THE ENTIRE S HARE PREMIUM COLLECTED BY THE ASSESSEE IS IN EXCESS OF FAIR MARK ET VALUE, WHICH HAPPENED TO BE FACE VALUE OF SHARES UNDER NET WORTH METHOD. ACCORDINGLY, HE ASSESSED A SUM OF RS.89,03,397/- U/ S 56(2)(VIIB) OF THE ACT. THE LD A.R STATED THAT THE AO PASSED A RE CTIFICATION ORDER ITA NO.902 /BANG/2019 PAGE 3 OF 6 DATED 22.02.2017 LATER ASSESSING THE CORRECT AMOUNT OF RS.88,92,756/-. THE AO ALSO ADDED THE ABOVE SAID A DDITION TO THE BOOK PROFIT WHILE COMPUTING BOOK PROFIT U/S 115JB O F THE ACT. 5. BEFORE LD CIT(A), THE ASSESSEE CONTESTED THE ADDITION MADE U/S 56(2)(VIIB) OF THE ACT, BUT WAS NOT SUCCESSFUL. WE NOTICE THAT THE ASSESSEE HAS NOT CONTESTED THE ADDITION MADE TO BOOK PROFIT COMPUTED U/S 115JB OF THE ACT. 6. BEFORE US, THE ASSESSEE IS CONTESTING THE AD DITION MADE U/S 56(2)(VIIB) OF THE ACT AND ALSO THE ADDITION MADE T O BOOK PROFIT. 7. THE LD A.R SUBMITTED THAT THE CONDITIONS FOR GRANTING EXEMPTION FROM THE PROVISIONS OF SEC 56(2)(VIIB) WA S RELAXED FURTHER BY SUBSEQUENT NOTIFICATION DATED 19-02-2019 IN G S R 127(E), WHICH SUPERSEDED THE NOTIFICATION ISSUED ON 11-04-2 018 AND 16- 01-2019. PURSUANT TO THE ABOVE SAID NOTIFICATION, THE CBDT HAS ISSUED FOLLOWING NOTIFICATIONS/CIRCULARS: - (A) NOTIFICATION NO.13/2019 DATED 5 TH MARCH, 2019 (B) INSTRUCTION DATED 9 TH AUGUST 2019 IN F NO.173/354/2019- ITA-1 (C) CONSOLIDATED CIRCULAR NO.22/2019 DATED 30 TH AUGUST, 2019. 8. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS RE GISTERED ITSELF AS START UP COMPANY, VIDE CERTIFICATE OF REGISTRATIO N NO. DIPP36415 DATED 10-04-2019 AND THE SAME IS VALID FOR TEN YEAR S FROM THE DATE OF INCORPORATION. HE SUBMITTED THAT THE ASSESSEE HA S ALSO GIVEN INTIMATION TO CBDT IN FORM NO.2 IN TERMS OF PROVISO TO SEC.56(2)(VIIB) OF THE ACT AND THE SAME HAS ALSO BE EN ACKNOWLEDGED BY CBDT, VIDE ITS E-MAIL DATED 12 TH APRIL, 2019. ITA NO.902 /BANG/2019 PAGE 4 OF 6 9. THE LD A.R SUBMITTED THAT, AS PER CONSOLIDAT ED CIRCULAR NO.22/2019 (REFERRED ABOVE) THE EXEMPTION GIVEN U/S 56(2)(VIIB) IS APPLICABLE TO THE ASSESSEE COMPANY FOR THE YEAR UND ER CONSIDERATION ALSO. THE LD A.R SUBMITTED THAT THE ASSESSEE COULD NOT FURNISH ALL THESE DOCUMENTS BEFORE THE AO, SINC E ALL THESE REGISTRATION, DOCUMENTS ETC., WERE OBTAINED SUBSEQU ENT TO THE ORDER PASSED BY LD CIT(A). ACCORDINGLY, HE SUBMITTED THA T THE ASSESSEE HAS FURNISHED THESE DOCUMENTS AS ADDITIONAL EVIDEN CES WITH A PRAYER TO ADMIT THEM. HE SUBMITTED THAT THESE DOCU MENTS HAVE BEARING ON THE IMPUGNED ADDITION AND HENCE THEY BE ADMITTED AND THE MATTER MAY BE RESTORED TO THE FILE OF THE AO. 10. THE LD D.R DID NOT OBJECT TO THE PRAYER OF T HE ASSESSEE. 11. WE NOTICE THAT THE ASSESSEE HAS OBTAINED RE GISTRATION AS START UP FROM DEPARTMENT OF PROMOTION OF INDUSTRY AND INT ERNAL TRADE ONLY ON 10-04-2019. ACCORDING TO THE ASSESSEE, IT IS ELIGIBLE FOR EXEMPTION FROM THE PROVISIONS OF SEC.56(2)(VIIB) FO R THE YEAR UNDER CONSIDERATION ALSO, AS PER THE CONSOLIDATED CIRCULA R ISSUED BY CBDT. WE NOTICE THAT THE ASSESSEE OBTAINED REGISTRA TION AFTER PASSING OF FIRST APPELLATE ORDER. HENCE THE ASSESS EE COULD NOT HAVE FURNISHED THIS DOCUMENT BEFORE THE TAX AUTHORITIES. SINCE THIS DOCUMENT SHALL HAVE BEARING ON THE IMPUGNED ADDITIO N, WE DEEM IT FIT TO ADMIT THE ADDITIONAL EVIDENCES AND ACCORDING LY ADMIT THEM. 12. SINCE THESE DOCUMENTS REQUIRE EXAMINATION AT THE END OF AO IN ACCORDANCE WITH LAW, WE DEEM IT PROPER TO RESTOR E THE ISSUES CONTESTED BEFORE US TO THE FILE OF THE AO. ACCORDI NGLY, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND RES TORE THE SAME TO THE FILE OF THE AO FOR EXAMINING IT AFRESH BY DULY CONSIDERING THE ITA NO.902 /BANG/2019 PAGE 5 OF 6 ADDITIONAL EVIDENCES FURNISHED BY THE ASSESSEE. AF TER AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD, THE AO MAY TAK E APPROPRIATE DECISION IN ACCORDANCE WITH LAW. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD OCT , 2020. SD/- SD/- ( BEENA PILLAI ) JUDICIAL MEMBER (B.R B ASKARAN ) ACCOUNTANT MEMBER BANGALORE, DATED, 23 RD OCT, 2020. / VMS / COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.