Chennai Bench of ITAT deletes addition u/s. 56(2)(viib)- Purposive Interpretation


Chennai Bench of ITAT deletes addition u/s. 56(2)(viib) in hands of a private limited co. (assessee) despite shares allotted at huge premium of Rs. 23,096 per share during AY 2014-15; Noting that assessee had only two shareholders (being mother and daugher) and mother had introduced Rs. 23.31 cr. into the assessee co. during relevant AY, ITAT observes that the benefit of such investment at an unrealistic share premium has only passed on to her daughter; Further observes that “Had Mrs. Sasikala Raghupathy (mother) gifted the money to her daughter”, such gift would not have been taxable by virtue of Sec. 56(2)(vi) & (x); Further referring to the Finance Minister’s speech that the provisions of Sec. 56(2)(viia) were introduced by Finance Act 2012 only to deter generation and use of black money, ITAT observes that in the case of assessee co., the investor’s source of investment is genuine and there is no possibility of generation and use of unaccounted money; ITAT concludes that when Sections 56(2)(vi), (viib) & (x) are interpreted harmoniously by lifting the corporate veil of the assessee co. “it is abundantly clear that Section 56(2)(viib) has no implication”

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