The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the provisions of section 56(2)(viia) of the Income Tax Act, 1961 is not applicable in a case where there is a mere difference in sale price and FMV where the sale price of shares at Rs.100 per share is more than FMV of the shares determined at Rs.99.13.
The assessee, Allianz International Pvt. Ltd., had sold shares of a particular company at a price of Rs.100 per share. While concluding the assessment proceedings, the Assessing Officer treated the difference between the sale price and the FMV of the shares as income of the assessee under Section 56(2) read with section 11UA and added back an amount of Rs.2,12,161 to the income of the assessee.
The assessee contended that the sale price of shares is more or less at par with the FMV of shares, assessee had obtained a valuation report determining the value of shares at Rs.99.13 per share, in terms of Rule 11UA.
Shri Saktijit Dey (Judicial Member) observed that “undisputedly, invoking the provisions of section 56(2)(viia) of the Act, the Assessing Officer has treated the difference between the sale price and FMV of the shares of the assessee as income of the assessee.”
“On careful reading of section 56(2)(viia) of the Act, it is observed that the Assessing Officer can invoke the provision in two contingencies. Firstly, if the shares are received by the assessee without consideration and aggregate FMV of shares exceeds Rs.50,000 then whole of such amount shall be treated as FMV of the shares and added to the income of the assessee. In the second situation, if the consideration for which shares are received is less than the aggregate FMV by an amount exceeding Rs.50,000, such excess amount shall be treated as consideration of the shares and added to the income of the assessee. In the facts of the present appeal, admittedly,the sale price of shares at Rs.100 per share is more than the FMV of the shares determined at Rs.99.13. Therefore, in the first place, the provisions of second 56(2)(viia) of the Act are not applicable,” the Tribunal observed.
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