Madras High Court
Commissioner Of Income Tax vs M/S.Tangi Facility Solutions Pvt Ltd on 4 November, 2024
Bench: R.Suresh Kumar, C.Saravanan
T.C.A.No.259 of 2024
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 04.11.2024
CORAM
THE HON'BLE MR.JUSTICE R.SURESH KUMAR
AND
THE HON'BLE MR.JUSTICE C.SARAVANAN
Tax Case Appeal No.259 of 2024
Commissioner of Income Tax
Central Circle 2(3), Chennai. ... Appellant
Vs.
M/s.Tangi Facility Solutions Pvt Ltd
Old No.42, New No.2, Luz Avenue
Mylapore, Chennai 600 004. ... Respondent
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Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961
against the order of the Income Tax Appellate Tribunal, 'B' Bench, Chennai,
dated 03.06.2024 in ITA No.735/Chny/2023.
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For Appellant : Mr.Karthik Ranganathan
Senior Standing Counsel
JUDGMENT
(Delivered by R.SURESH KUMAR,J.)
This appeal has been filed against the order of the Income Tax Appellate
Tribunal in ITA No.735/Chny/2023 dated 03.06.2024.
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2. The following substantial questions of law have been raised by the
appellant / Revenue.
1. Whether on the facts and circumstances of the case and in law,
the Tribunal was right in holding that the provisions of Section
2(22)(b) of the Act do not apply in the present case when the
only business activity carried out by the assessee in investing in
shares of M/s.UDS Pvt Ltd and reporting the income arising
from this investment as dividends or profits from the sale of
those shares?
2. Whether on the fats and circumstances of the case, the Tribunal
was correct in holding that the provisions of Section 56(2)(viia)
of the Act do not apply when the shares in question were
acquired without any consideration, as opposed to their fair
market value of Rs.2,54,55,24,025/- as stipulated in Section
56(2)(viia)?
3. Whether the Tribunal was correct in holding that the provisions
of Section 56(2) (viia) of the Act do not apply, considering the
CBDT Circular No.3/2019 dated 21.01.2019 clearly states that
excluding fresh issuances of shares or bonus shares from the
provisions of Section 56(2)(viia) would be an incorrect
approach, as this could lead to potential abuse and contradict
the explicit provisions and legislative intent of Section
56(2)(viia)? Was the inclusion of Clause (vii) in Section 56(2)
intended as an anti-abuse measure to prevent the transfer of
shares of a specified company for no consideration or
inadequate consideration?
4. Whether, based on the facts and circumstances of the case and
applicable law, the Tribunal was correct in relying on the
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decision of the Hon'ble Karnataka High Court in PCIT Vs.
Dr.Ranjan Pai (ITA No.501 of 2016 dated 15.12.2020), given
the present assessee's method of accounting for reporting
dividend income and profits from the sale of shares received
from M/s.UDS Pvt Ltd., year after year, is distinguishable from
the accounting method used in the case of Dr.Ranjan Pai?
5. Whether, based on the facts and circumstances of the case and
applicable law, the Tribunal was correct in relying on the
decision in CIT Vs. Dalmia Investment Co., Ltd. (52 ITR 567)
considering that the judgment pertains to profits computed from
the sale of shares, whereas in the present case, the addition was
made on the entire value of the shares under Section 56(2)(viia)
of the Act due to the shares being acquired without any
consideration, despite their fair market value being Rs.275/- per
share?
6. Whether the learned ITAT erred in allowing the assessee's
appeal based on the decisions of the Hon'ble Supreme Court in
CIT Vs.Dalmia Investment Co. Ltd (52 ITR 567) and Hunsur
Plywoods Limited Vs. CIT (229 ITR 112) by disregarding the
clarification issued by the CBDT in Circular No.3/2019 dated
21.01.2019, which clearly states that excluding fresh issuances
of shares or bonus shares from the provisions of Section
56(2)(viia) of the Act is not a correct approach, as it could lead
to abuse and contradicts the express provisions and legislative
intent of Section 56(2)(viia)?"
3. Heard Mr.Karthik Ranganathan, learned Senior Standing Counsel
appearing for the appellant / Revenue.
4. The bonus shares that have been distributed to the respondent /
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assessee whether amounts to income, was the question that was posed before
the Tribunal. In fact that issue had already been decided at least in three
decisions which have been cited by the Tribunal in the order impugned itself.
One is CIT Vs.Dalmia Investment Co. Ltd (52 ITR 567), the second decision is
Hunsur Plywoods Limited Vs. CIT (229 ITR 112) and the third decision is PCIT Vs.
Dr.Ranjan Pai (ITA No.501 of 2016 dated 15.12.2020).
5. Since this issue has been considered as stated in the earlier decisions,
which in fact had been followed by the Tribunal through the impugned order,
contra to the same since there has been no judgment, the appeal filed by the
Revenue challenging the order passed by the Tribunal dated 03.06.2024 cannot
be decided on a fresh question of law. Therefore, we are in agreement with the
view taken by the Tribunal, there is no scope for interference with the same.
Hence, the appeal deserves to be dismissed. Accordingly, it is dismissed. No
costs.
(R.S.K.,J.) (C.S.N.,J.)
04.11.2024
NCS : Yes/No
Index : Yes/No
KST
To
The Income Tax Appellate Tribunal, 'B' Bench, Chennai.
R.SURESH KUMAR, J.
https://www.mhc.tn.gov.in/judis
AND
C.SARAVANAN, J.
KST
04.11.2024
https://www.mhc.tn.gov.in/judis
