The judgment of the court was delivered by
All these six appeals by the Revenue under s. 260A of the IT Act, 1961 (the Act) take exception to the common order dt. 25th Nov., 2016 passed by the Tribunal (Tribunal). The common impugned order of the Tribunal dismissed the Revenue's appeals in respect of the six Respondent–Assesses all relating to the asst. yr. 2012-13. The issue arising in all these appeals are identical viz. Whether the amount received as share premium on issue of share by the Respondent–assesses Companies could be taxed as profit and gains of business in the hands of asseessees under s. 28(iv) of the Act.
2. Mr. A.J. Bhoot the learned counsel of the Revenue states that the relevant facts and questions arising for our consideration in all these six appeals are identical and be heard together. Therefore they are heard together.
3. Although numerous questions of law has been raised in the six appeals, Mr. A.J. Bhoot learned counsel for appellant urges only the following questions of law for our consideration in all these appeals.
"(A) Whether on the facts and in circumstances of the case and in law, the Tribunal was correct to uphold the decision on CIT(A) that the share premium received by the assessee Company cannot be taxed under s. 68 of the Act ignoring the ratio laid down by this Court in its decision in reported Major Metals Ltd. vs. Union of India & Ors. (2012) 251 CTR (Bom) 385 : (2012) 69 DTR (Bom) 274 : (2013) 359 ITR (Bom) 450 ?
(B) Whether on the facts and in circumstances of the case and in law, the Tribunal as well as CIT(A) was right in deleting addition made by the AO, by holding that the share premium receipt is capital in nature?."
4. During the previous year relevant to the subject asst. yr. 2012-13, all the Respondent–assessees had increased its Share Capital by issuing its shares at a premium. During the course of assessment, the AO negatived the Respondent–assessee's contention that the share premium received by it on issue of shares is was a capital receipt and hence could not be taxed as income. The AO held that the respondent–assessee did not have any significant business at the time of issue of share capital to warrant receipt of share premium. Thus, the AO while passing the assessment order under s. 143(3) of the Act in five of the six proceedings, on 18th March, 2015 and in one proceeding on 20th March, 2015, added the share premium received to its income as profits and gains of business under s. 28(iv) of the Act.
5. Being aggrieved by the above Assessment orders, the respondent–assessees in all the six appeals carried the above issue in appeal to the CIT(A). By six distinct orders all dt. 15th March, 2016, (one in respect of each respondent–Assessee) held that s. 28(iv) of the Act would have no application, as it dealt with the benefit other than cash or money arising out of business as held by this Court in Mahindra & Mahindra Ltd. vs. CIT (2003) 182 CTR (Bom) 34 : (2003) 261 ITR 501 (Bom) . It is also to be noted that the CIT(A) also held that s. 68 of the Act will not apply as during the course of Assessment proceedings, complete details of the investor i.e., the PAN, Balance Sheet of IT Return, copies of Bank statements, resolution of the Board authorizing the and also the parties who made the investment have confirmed the transaction in Assessment proceedings. In his remand report also the AO did not dispute the above position. Thus, the six appeals of the respondent–Assesees were allowed by six orders dt. 15th March, 2016, of the CIT(A).
6. Being aggrieved the Revenue carried the above issue in appeal to the Tribunal. Admittedly, the only issue which was urged before the Tribunal is the addition of share capital premium received by the Respondents–assesses to its income under the head of Profit and Gains of Business under s. 28(iv) of the Act. On the only issue urged before it, the impugned order of the Tribunal holds that s. 28(iv) of the Act will have application only on the amounts received as income and not on capital Account. The impugned order placed reliance upon the decision of this Court in the case of Vodafone India Services (P) Ltd. vs. Union of India (2014) 271 CTR (Bom) 488 : (2014) 110 DTR (Bom) 1 : (2014) 368 ITR 1 (Bom) , wherein, it has been held that the amount received on share capital including premium are undoubtedly on capital account in absence of express legislation. Further reliance was placed upon the decision of the Hon'ble apex Court in M/s G.S. Homes & Hotels (P) Ltd. vs. Dy. CIT (Civil Appeal No. (S) 7379-7380 of 2016 rendered on 9th Aug., 2016) [reported at (2016) 144 DTR (SC) 371 : (2017) 291 CTR (SC) 240—Ed.] wherein, the decision of the Karnataka High Court holding that the amount received on account of shares from various share holders be treated as business income was reversed. The impugned order also made reference to the unreported decision of this Court in Idea Cellur Ltd. vs. The Union of Indian & Ors. (Writ Petition (Lodg) No. 1462 of 2013, decided on 12th Sept., 2013, wherein, this Court while dealing with issue of non granting of stay of demand in its writ-jurisdiction has observed that any benefit which is received on capital account cannot be subject matter of Income Tax under s. 28(iv) of the Act. Thus, the appeals of the Revenue were dismissed by following the decision of this Court and of apex Court that the receipt of share premium is on capital account and cannot be brought to tax as income.
7. In the back-drop of the above facts, we shall now decide the above two questions which arrise for our consideration.
8. Regarding Question A :
(a) The issue raised by the Revenue in this question is to bring to tax the share premium received under s. 68 of the Act. We find that the issue of bringing the share premium to tax under s. 68 of the Act was not an issue which was urged by the appellant–Revenue before the Tribunal. The only issue which was urged before the Tribunal as recorded in para 11 of the impugned order is the addition of share capital and share application money in the hands of the assessee as income under s. 28(iv) of the Act. We find that the CIT(A) did consider the issue of applicability of s. 68 of the Act and concluded that it does not apply. The Revenue seems to have accepted the same and did not urge this issue before the Tribunal. Mr. Bhoot, learned counsel appearing for the Revenue also fairly states that the issue of applicability of s. 68 of the Act was not urged by the Revenue before the Tribunal.
(b). It is a settled position in law as held by this Court in CIT vs. Tata Chemicals Ltd. (2002) 175 CTR (Bom) 443 : (2002) 256 ITR 395 (Bom) , that in an appeal under s. 260A of the Act, the High Court can only decide a question if it had been raised before the Tribunal even if not determined by the Tribunal. Therefore, no occasion to consider the question as prayed for arises.
(c) In any case, we may point out that the amendment to s. 68 of the Act by the addition of proviso thereto took place w.e.f. 1st April, 2013. Therefore, it is not applicable for the subject asst. yr. 2012-13. So for as the pre-amended s. 68 of the Act is concerned, the same cannot be invoked in this case, as evidence was led by the Respondents-Asessee before the AO with regard to identity, capacity of the investor as well as the genuineness of the investment. Therefore, admittedly, the AO did not invoke s. 68 of the Act to bring the share premium to tax. Similarly, the CIT(A) an consideration of facts, found that s. 68 of the Act cannot be invoked. In view of the above, it is likely that the Revenue may have taken an informed decision not urge the issue of s. 68 of the Act before the Tribunal.
(d). We may also point out that decision of this Court in Major Metals Ltd. vs. Union of India (supra), proceeded on its own facts to uphold the invocation of s. 68 of the Act by the settlement commission. In the above case, the settlement commission arrived at a finding of fact that the subscribers to shares of the assessee–company were not creditworthy in as much as they did not have financial standing which would enable them to make an investment of Rs. 6,00,00,000 at premium at Rs. 990 per share. It was this finding of the fact arrived at by the settlement commission which was not disturbed by this Court in its writ-jurisdiction. In the present case the person who have subscribed to the share and paid share premium have admittedly made statement on oath before the AO as recorded by the Tribunal. No finding in this case has been given by the Authorities that shareholder/share applicants were unidentifiable or bogus.
(e). In the above view Question No. A is not being entertained in view of the decision in Tata chemical Ltd.(supra). Accordingly, the question (A) is not entertained.
9. Regarding Question B.:
(a) We find that the impugned order of the Tribunal upheld the view of the CIT(A) to hold that share premium is capital receipt and therefore, cannot be taxed as Income. This conclusion was reached by the impugned order following the decision of this Court in Vodafone India Services (P) Ltd. (supra) and of the apex Court in M/s G.S. Homes and Hotel (P) Ltd. (supra). In both the above cases the Court has held that the amount received on issue of share capital including premium are on capital account and cannot be considered to be income.
(b) It is further pertinent to note that the definition of income as provided under s. 2(24) of the Act at the relevant time did not define as income any consideration received for issue of share in excess of its fair market value. This came into the statute only w.e.f. 1st April, 2013 and thus, would have, no application to the share premium received by the respondent–assessee in the previous year relevant to the asst. yr. 2012-13. Similarly, the amendment to s. 68 of the Act by addition of proviso was made subsequent to previous year relevant to the subject Asst. yr. 2012-13 and cannot be invoked. It may be pointed out that this Court in CIT vs. M/s Gangadeep Infrastructure (P) Ltd. (IT Appeal No. 1613 of 2014 decided in 20th March, 2017) has while refusing to entertain a question with regard to s. 68 of the Act has held that the proviso to s. 68 of the Act introduced w.e.f. 1 April, 2013, will not have retrospective effect and would be effective only from asst. yr. 2013-14.
(c) In view of the above, Question No. B as proposed also does not give rise any substantial question of law as it is an issue concluded by the decision of this Court in M/s Vodafone India Services (P) Ltd. (supra) and in the apex Court in M/s G.S. Homes & Hotels (P) Ltd. (supra). Thus not entertained.
10. Therefore, all the six appeals are dismissed. No order as to costs.