MADHYA PRADESH HIGH COURT
– COMMISSIONER OF INCOME TAX VS PEOPLES GENERAL HOSPITAL LTD,
M.A.I.T. NO. 27/2008
27 JUNE, 2013
Core Fact of the Case: ………..In this case return was filed on 13.10.2003 in which
income was declared as nil. The assessment order was passed on 01.03.2006 by
which the Assessing Officer made an addition of Rs. 21,27,50,403/- and assessed
the income of the respondent at Rs. 21,27,50,403/-. The aforesaid addition was
made on the ground that one M/s Alliance Industries Limited, Sharjah had made
share subscription to the capital of respondent. The assessing officer doubted
creditworthiness of M/s Alliance Industries Limited, Sharjah and directed
addition of the amount of share subscription provided by the aforesaid Company
to the assessee.……….The Assessing Officer held thus:-……………”On going through the
above details furnished by the assessee, it is clear that although they indicate
the identity of the NRI Company and the mode of transfer of money to the
assessee but evidently lack in proving creditworthiness of the NRI Company. The
transactions shown by the assessee through the banking channels ipso facto do
not establish the financial capacity of the NRI Company. Further, it cannot be
said that a transaction, which takes place by way of cheque, is invariably
sacrosanct.
Summarised Judgment : ………. In the present case, the assessee had established the
identity of investor who had provided the share subscription and it was
established that the transaction was genuine though as per contention of the
respondent the creditworthiness of the creditor was also established. In the
present case, in the light of the judgment of Lovely Exports (P) Ltd., we have
to see only in respect of the establishment of the identity of the investor.
The Delhi High Court also in Divine Leasing & Finance Ltd. (supra), considering
the similar question held that the assessee Company having received
subscriptions to the public/rights issue through banking channels and furnished
complete details of the shareholders, no addition could be made under section 68
in the absence of any positive material or evidence to indicate that the
shareholders were benamidars or fictitious persons or that any part of the share
capital represented company’s own income from undisclosed sources. The similar
view has been taken by the other High Courts.
As the Apex Court has considered the law in Lovely Exports (supra) and in view
of law laid down by the Apex Court, we find that the substantial questions
framed in these appeals do not arise for our consideration. Accordingly, all
these appeals are dismissed with no order as to costs.
Analysis : The above judgment says that, “…………….. The Delhi High Court also in
Divine Leasing & Finance Ltd. (supra), considering the similar question held
that the assessee Company having received subscriptions to the public/rights
issue through banking channels and furnished complete details of the
shareholders, no addition could be made under section 68 in the absence of any
positive material or evidence to indicate that the shareholders were benamidars
or fictitious persons or that any part of the share capital represented
company’s own income from undisclosed sources. The similar view has been taken
by the other High Courts………..”. In the case of JSM also banking details have
been made available and nothing adverse is recorded.
