Home ›

Search Results For: 56(2)(viia)

This section is now closed. Click here for new judgements


Posted on by editor
COURT:
CORAM: ,
SECTION(S): ,
GENRE:
CATCH WORDS:
COUNSEL: ,
DATE: October 16, 2019 (Date of pronouncement)
DATE: November 9, 2019 (Date of publication)
AY: 2015-16
FILE: Click here to view full post with file download link
CITATION:
S. 56(2)(viia) cannot apply to a foreign company as Rule 11U(b)(ii) (prior to 01.04.2019) which defines "balance sheet‟ was not applicable to a foreign company. If the computation provisions cannot apply, the charging section cannot apply. The amendment to Rule 11U with effect from 1.4.19 is prospective in nature (B. C. Srinivasa Shetty 128 ITR 294 (SC), Palai Central Bank Ltd (1985) 1 SCC 45 followed)

We hold that since the shares of a foreign company were acquired by the assessee company in the instant case, the ld AO ought to have relied on the balance sheet as audited by the auditor appointed under the Indian Companies Act. In the instant case, the ld AO had relied on the balance sheet of KNP Industries Pte Ltd, Singapore, which is prepared in accordance with Singapore Companies Act, which fact is not in dispute before us. Admittedly, the case of the assessee falls squarely on clause (ii) of the definition of “Balance Sheet‟ as defined in Rule 11U of the Rules supra. Hence it is mandatory to draw a balance sheet as on the valuation date i.e. 10.2.2015 /11.2.2015 (being the date of purchase of shares by the assessee company) and that the said balance sheet should have been audited by an auditor appointed under section 224 of the Companies Act, 1956. Hence it could be safely concluded that the ld AO had applied the valuation method on a different date which is not in accordance with law and that since the computation mechanism provided in Rule 11UA of the Rules is not applicable to the facts of the instant case, the provisions of section 56(2)(viia) of the Act also could not be invoked

Read more ›

Posted on by editor
COURT:
CORAM: ,
SECTION(S): , ,
GENRE:
CATCH WORDS: ,
COUNSEL: ,
DATE: February 22, 2019 (Date of pronouncement)
DATE: February 27, 2019 (Date of publication)
AY: 2012-13
FILE: Click here to view full post with file download link
CITATION:
S. 28(iv)/ 56(2)(viia)/ 47(vii): S. 56(2)(viia) is an anti-abuse provision which applies only to cases of bogus capital building and money laundering. It does not apply to an amalgamation where shares are allotted at alleged undervaluation. Increase in general reserves due to recording of assets of amalgamating company at FMV not give rise to any real income to the assessee. It is capital in nature. Amendment to s. 47(vii) by FA 2012 is clarificatory & retrospective

The question, therefore, before us is, Whether the provisions of section 47(vii) as amended by Finance Act 2012 is retrospective in nature ? It is a fact that existing provision of section 47(vii) was not possible to comply with when amalgamating company is the 100% subsidiary of the amalgamated company. This is, in fact, was a defect in Section 47(vii) prior to the amendment. The amendment was made to cure this defect. Therefore, the decisions relied upon by the Learned Counsel for the Assessee above squarely apply to this case as the provisions of section 47(vii) prior to the amendment if read clause-(a) thereof, was unworkable and could not have applied in case, where amalgamating company is the owner of 100% shares of the amalgamating company

Read more ›

Posted on by editor
COURT:
CORAM: ,
SECTION(S):
GENRE:
CATCH WORDS: ,
COUNSEL: ,
DATE: June 29, 2018 (Date of pronouncement)
DATE: July 5, 2018 (Date of publication)
AY: 2014-15
FILE: Click here to view full post with file download link
CITATION:
S. 56(2)(viia) is a counter evasion mechanism to prevent laundering of unaccounted income under the garb of gifts. The primary condition for invoking S. 56(2)(viia) is that the asset gifted should become a “capital asset” and property in the hands of recipient. If the assessee-company has purchased shares under a buyback scheme and the said shares are extinguished by writing down the share capital, the shares do not become capital asset of the assessee-company and hence s. 56(2)(viia) cannot be invoked in the hands of the assessee company

The provisions of sec. 56(2)(viia) should be applicable only in cases where the receipt of shares become property in the hands of recipient and the shares shall become property of the recipient only if it is “shares of any other company”. In the instant case, the assessee herein has purchased its own shares under buyback scheme and the same has been extinguished by reducing the capital and hence the tests of “becoming property” and also “shares of any other company” fail in this case. Accordingly we are of the view that the tax authorities are not justified in invoking the provisions of sec. 56(2)(viia) for buyback of own shares

Read more ›

Posted on by editor
COURT:
CORAM: ,
SECTION(S): ,
GENRE:
CATCH WORDS: , ,
COUNSEL:
DATE: March 7, 2018 (Date of pronouncement)
DATE: April 21, 2018 (Date of publication)
AY: 2014-15
FILE: Click here to view full post with file download link
CITATION:
S. 56(2)(viia)/ Rule 11UA: The "fair market value" of shares acquired has to be determined by the taking the book values of the underlying assets and not their market values

On the plain reading of Rule 11UA, it is revealed that while valuing the shares the book value of the assets and liabilities declared by the TEPL should be taken into consideration. There is no whisper under the provision of 11UA of the Rules to refer the fair market value of the land as taken by the Assessing Officer as applicable to the year under consideration

Read more ›