1.  Sony India Pvt. Ltd. Vs. Addl. Commissioner of Income Tax & Anr., W.P.(C) 1235/2014, C.M. Appl. 2576/2014, Date of Decision: 24/02/2014, Delhi High Court

Section 220 of the Income Tax Act, 1961

The Hon’ble Delhi High Court has held that, the Assessing Officer after rejected the stay application filed by the assessee, must wait for a reasonable period before taking coercive steps to recover the amounts u/s 226 of the Act. Since, the assessee faced with an order rejecting the stay application, may need some time to make arrangements to pay the entire tax demand or come up with proposals for paying the same in instalments. The opportunity must be afforded to the assessee.

(Please click here for judgment)

2.  Sudhir Menon HUF Vs. Asst. Commissioner of Income Tax, ITA No. 4887/Mum/2013, Assessment Year: 2010-11, Date of Decision: 12.03.2014, ITAT – Mumbai

Section 56(2)(vii) of the Income Tax act, 1961

Whether the provision of section 56(2)(vii)(c) of the Act are attracted where the in case of bonus/ rights shares  allotted in a disproportionate manner at a price less than the FMV of the shares.

Held: No

Brief facts, the assessee held 15,000 shares in a company, the entire capital in which is held by the family members of the assessee’s karta’s family, representing 4.98% of the share capital. Further, it was allotted 1,94,000 shares at the face value of Rs.100 each, on a proportionate basis. As book value of the shares of the company as on 31.03.2009 was Rs.1,538/- per share, the AO made addition on account of acquisition of additional shares by treating the difference of Rs.1,438/- per share in terms of section 56(2)(vii)(c) r.w. relevant rules i.e. Rule 11U & 11UA.
The Hon’ble Tribunal held that provisions of section 56(2)(vii)(c)(ii) of the Act provides that where an individual or a HUF receives any property for a consideration which is less than the FMV of the property, the difference shall be assessed as income of the recipient. The said section does not apply to the issue of bonus shares because there is a mere capitalization of profit by the issuing-company and there is neither any increase nor decrease in the wealth of the shareholder as his percentage holding remains constant. The same argument applies pari materia to the issue of additional shares to the extent it is proportional to the existing share-holding because to the extent the value of the property in the additional shares is derived from that of the existing shareholding, on the basis of which the same are allotted, no additional property can be said to have been received by the shareholder. The fall in the value of the existing holding has to be taken into account. Since, there is no disproportionate allotment, there is no scope for any property being received by them on the said allotment of shares.

(Please click here for judgment)