Robust Hotels P Ltd. , CHENNAI v. DCIT Corporate Circle 5(2), CHENNAI

ITA 2298/CHNY/2017 | 2014-2015
Pronouncement Date: 30-11-2017 | Result: Allowed

Appeal Details

RSA Number 229821714 RSA 2017
Assessee PAN AADCR5418B
Bench Chennai
Appeal Number ITA 2298/CHNY/2017
Duration Of Justice 2 month(s) 10 day(s)
Appellant Robust Hotels P Ltd. , CHENNAI
Respondent DCIT Corporate Circle 5(2), CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Allowed
Bench Allotted A
Tribunal Order Date 30-11-2017
Last Hearing Date 22-11-2017
First Hearing Date 22-11-2017
Assessment Year 2014-2015
Appeal Filed On 20-09-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH CHENNAI . . . ' # BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI S. JAYARAMAN ACCOUNTANT MEMBER ./ ITA NOS.2296 & 2298/MDS/2017 & '& / ASSESSMENT YEARS : 2010-11 & 2014-15 M/S ROBUST HOTELS PVT. LTD. C/O SHRI S. SRIDHAR SH. A.S. SRIRAMAN ADVOCATES NEW NO.14 OLD NO.82 FLAT NO.5 1 ST AVENUE INDIRA NAGAR ADYAR CHENNAI - 600 020. PAN : AADCR 5418 B V. THE DEPUTY COMMISSIONER OF INCOME TAX CORPORATE CIRCLE 5(2) CHENNAI - 600 034. ()*/ APPELLANT) (+ )*/ RESPONDENT) )* - . / APPELLANT BY : SHRI S. SRIDHAR ADVOCATE + )* - . / RESPONDENT BY : SHRI SRIRAM BHARATH CIT / - 0' / DATE OF HEARING : 22.11.2017 12' - 0' / DATE OF PRONOUNCEMENT : 30.11.2017 / O R D E R PER N.R.S. GANESAN JUDICIAL MEMBER: BOTH THE APPEALS OF THE ASSESSEE ARE DIRECTED AGA INST THE COMMON ORDER PASSED BY THE COMMISSIONER OF INCOME T AX (APPEALS) -3 CHENNAI DATED 30.06.2017 FOR THE AS SESSMENT YEARS 2010-11 AND 2014-15. SINCE COMMON ISSUE ARISES FOR 2 I.T.A. NOS.2296 & 2298/MDS/17 CONSIDERATION IN BOTH THE APPEALS WE HEARD BOTH TH E APPEALS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON O RDER. 2. SHRI S. SRIDHAR THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINES S OF HOTEL INDUSTRY. ACCORDING TO THE LD. COUNSEL THE ASSESS EE HAS ISSUED 13 96 000 OPTIONALLY CONVERTIBLE PREFERENCE SHARES OF ` 10/- EACH AT THE PREMIUM OF ` 205/- EACH. THE ASSESSEE-COMPANY IN FACT RECEIVED ` 28 61 80 000/- TOWARDS SHARE PREMIUM AND TAKEN THIS AMOUNT TO RESERVE AND SURPLUS IN THE BALANCE SHEET. IN FACT ACCORDING TO THE LD. COUNSEL THE OPTIONALLY CONVER TIBLE PREFERENCE SHARES WERE ISSUED TO M/S GJS HOTELS LIMITED THERE FORE THE IDENTITY OF THE INVESTOR IS NOT IN DISPUTE. ACCORD ING TO THE LD. COUNSEL M/S GJS HOTELS LIMITED PAID THE MONEY TO T HE ASSESSEE THROUGH BANKING CHANNEL THEREFORE THE GENUINENESS OF THE TRANSACTION IS ALSO NOT IN DISPUTE. THE CREDITWORT HINESS AND FINANCIAL STRENGTH OF M/S GJS HOTELS LIMITED WAS ALSO ESTABLI SHED. THE ASSESSEE ALSO FILED ALL THE DETAILS BEFORE THE ASSE SSING OFFICER. THEREFORE ACCORDING TO THE LD. COUNSEL THE SHARE PREMIUM CANNOT BE TAKEN AS INCOME IN THE HANDS OF THE ASSESSEE. A CCORDING TO THE LD. COUNSEL THE ASSESSING OFFICER AS WELL AS THE C IT(APPEALS) 3 I.T.A. NOS.2296 & 2298/MDS/17 DOUBT THE VALUATION OF SHARES AT ` 205/- EACH WHEN THE FACE VALUE OF THE SHARE WAS ` 10/- EACH. ACCORDING TO THE LD. COUNSEL WHEN THE ASSESSEE RECEIVED THE MONEY THROUGH BANKING CHANNEL AND FINANCIAL POSITION AND CREDITWORTHINESS OF M/S GJS HOTELS LIMITED WERE ESTABLISHED BEYOND DOUBT THERE CANNOT BE ANY ADDITION IN THE HANDS OF THE ASSESSEE. 3. ON THE CONTRARY SHRI SRIRAM BHARATH THE LD. DE PARTMENTAL REPRESENTATIVE SUBMITTED THAT DURING THE ASSESSMEN T YEAR 2010- 11 THE ASSESSEE RECEIVED ` 28 61 80 000/- FROM THE HOLDING COMPANY M/S GJS HOTELS LIMITED. SIMILARLY DURING THE ASSESSMENT YEAR 2014-15 THE ASSESSEE RECEIVED ` 44 35 99 125/- FROM THE VERY SAME HOLDING COMPANY NAMELY GJS HOTELS LIMITED. ACCORDING TO THE LD. D.R. THE ASSESSEE ISSUED OPERATIONALLY CON VERTIBLE PREFERENCES SHARES AT THE ESTIMATED COST OF ` 205/- PER SHARE AS AGAINST THE FACE VALUE OF ` 10/- PER SHARE. SINCE THE FACE VALUE WAS ` 10/- PER SHARE ACCORDING TO THE LD. D.R. THE ASSE SSING OFFICER AS WELL AS THE CIT(APPEALS) DOUBTED THE BONA FIDES AND GENUINENESS OF THE TRANSACTION. ACCORDING TO THE LD. D.R. TH E NET WORTH OF THE COMPANY HAS TO BE VALUED EITHER ON THE BASIS OF THE NET ASSET VALUE OR AT DISCOUNTED CASH FLOW METHOD. IN THIS CASE A CCORDING TO THE 4 I.T.A. NOS.2296 & 2298/MDS/17 LD. D.R. FOR THE ASSESSMENT YEAR 2010-11 THE ASSE SSEE VALUED THE NET WORTH OF THE COMPANY ON THE BASIS OF THE NET AS SET VALUE. HOWEVER FOR THE ASSESSMENT YEAR 2014-15 THE ASSES SEE VALUED AT CASH FLOW METHOD. ACCORDINGLY FOR THE ASSESSMENT YEAR 2014-15 THE ASSESSEE VALUED THE SHARE AT ` 22.11 PER SHARE. IN RESPECT OF THIS ACCORDING TO THE LD. D.R. THE ASSESSEE HAS F ILED THE VALUATION REPORT FROM SS KOTHARI MEHTA & CO DATED 02.11.2007. THEREFORE ACCORDING TO THE LD. D.R. THERE IS NO BASIS FOR VA LUING SHARES AT ` 205/-. HENCE THE ASSESSING OFFICER FOUND THAT THE AMOUNT CLAIMED TO BE RECEIVED FROM M/S GJS HOTELS LIMITED IS NOTHING BUT THE ASSESSEES INCOME. THEREFORE ACCORDING TO THE LD. D.R. THE SAME WAS BROUGHT TO TAXATION UNDER SECTION 68 OF TH E INCOME-TAX ACT 1961 (IN SHORT 'THE ACT'). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. FOR BOTH THE ASSESSMENT YEARS THE ASSESSING OFFICER MADE ADDITI ON UNDER SECTION 68 OF THE ACT IN RESPECT OF THE PREMIUM REC EIVED BY THE ASSESSEE FOR ALLOTMENT OF OPTIONALLY CONVERTIBLE PR EFERENTIAL SHARES. THE ASSESSEE CLAIMS THAT GENUINENESS OF TR ANSACTION WAS ESTABLISHED AND IDENTITY OF THE COMPANY WHICH INVES TED IN THE SHARE 5 I.T.A. NOS.2296 & 2298/MDS/17 OF THE ASSESSEE-COMPANY WAS ALSO ESTABLISHED. THE CREDITWORTHINESS OF THE COMPANY WAS ALSO ESTABLISHE D. THEREFORE THERE CANNOT BE ANY ADDITION. 5. THE CIT(APPEALS) FOR THE ASSESSMENT YEAR 2014-15 FOUND THAT AS PER THE PROVISIONS OF SECTION 56(2)(VIIB) O F THE ACT INTRODUCED BY THE FINANCE ACT 2012 WITH EFFECT FRO M 01.04.2013 THE EXCESS FAIR MARKET VALUE FOR ALLOTMENT OF ANY S HARE ON PREMIUM HAS TO BE TREATED AS INCOME FROM OTHER SOURCES. IN THIS CASE THE VALUATION REPORT FILED BY THE ASSESSEE APPEARS TO H AVE SHOWN THAT THE VALUE WAS ` 22.11 PER SHARE. THE QUESTION ARISES FOR CONSIDERATION IS WHETHER THE SHARE PREMIUM RECEIVED BY THE ASSESSEE CAN BE CONSIDERED AS INCOME WHEN THE NET W ORTH OF THE COMPANY IS NOT EQUAL TO THE VALUE OF THE SHARE PREM IUM RECEIVED BY THE ASSESSEE? IT APPEARS FROM THE ORDERS OF THE LO WER AUTHORITIES THAT THE VALUATION OF NET WORTH OF THE COMPANY WAS MADE ON THE BASIS OF NET ASSET VALUE FOR THE ASSESSMENT YEAR 20 10-11. HOWEVER FOR THE ASSESSMENT YEAR 2014-15 IT WAS VA LUED AT DISCOUNTED CASH FLOW METHOD. THEREFORE THERE WAS CONFUSION WITH REGARD TO THE VALUE OF THE SHARES ARRIVED BY THE AS SESSEE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE NET WORTH OF THE 6 I.T.A. NOS.2296 & 2298/MDS/17 COMPANY HAS TO BE ASSESSED EITHER AT NET ASSET VALU E METHOD OR AT DISCOUNTED CASH FLOW METHOD. SINCE THE ASSESSEE IS NOT FOLLOWING UNIFORM METHOD THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED BY THE ASSESSING OF FICER. ACCORDINGLY ORDERS OF BOTH THE AUTHORITIES BELOW A RE SET ASIDE AND THE ENTIRE ISSUE RAISED BY THE ASSESSEE WITH REGARD TO THE ADDITION MADE ON ACCOUNT OF SHARE PREMIUM IS REMITTED BACK T O THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE- EXAMINE THE MATTER WITH REGARD TO METHOD OF VALUATION ADOPTED B Y THE ASSESSEE AND FIND OUT THE DIFFERENCE IF ANY DUE TO CHANGE OF METHOD AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 6. IN THE RESULT BOTH THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 30 TH NOVEMBER 2017 AT CHENNAI. SD/- SD/- ( ) ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) ' / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI 4 /DATED THE 30 TH NOVEMBER 2017. KRI. 7 I.T.A. NOS.2296 & 2298/MDS/17 - +056 76'0 /COPY TO: 1. )* /APPELLANT 2. + )* /RESPONDENT 3. / 80 () /CIT(A)-3 CHENNAI-34 4. PRINCIPAL CIT- 5 CHENNAI 5. 69 +0 /DR 6. :& ; /GF.