The AO found that on the face value of share of Rs.10 allotted on 03-11-2012 premium of Rs.90 per share was charged, whereas the shares allotted on 26-3-2013 were issued at a premium of Rs.31.67/-per share only. The AO held that the premium charged to the extent of Rs.55.45 per share was excessive, and accordingly, the share premium of Rs.94.27 lakhs was added u/s. 56(2)(viib).

Held that the provision of S. 56(2)(viib) applies regardless of whether the consideration for the shares is in the form of money or non-cash consideration (such as the conversion of a loan into share capital). If the company issues shares at a price higher than their FMV, the excess amount over the FMV is chargeable to tax under the head Income from Other Sources, and the conversion of the loan into share capital does not provide an exemption from the application of this section. (AY. 2013-14)