Genuine issue of Shares to Shareholders not to be considered under Anti-Abuse Provisions of the IT Act

Last updated: 08 October 2021

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The Income Tax Appellate Tribunal (ITAT) has ruled that genuine issuances of shares to existing shareholders are not subject to the anti-abuse provisions under Section 56(2) of the Income Tax Act. This decision aligns with the legislative intent clarified by CBDT Circular No. 10/2018, which states that these provisions do not apply to fresh share issuances, including bonus, rights, and preference shares. The Tribunal found that the respondent's increased shareholding was largely due to relatives not exercising their rights, and therefore, the anti-abuse measures were inappropriately applied.

Court :
ITAT Mumbai

Brief :
In Income Tax Officer v. Shri Rajeev Ratanlal Tulshyan [I.T.A. No.5748/Mum/2017 A.Y. 2014-15 dated October 01, 2021] [along with cross objection filed by Shri Rajeev Ratanlal Tulshyan("the Respondent")], the Income Tax Officer ("the Appellant") filed an appeal for the Assessment Year ("AY") 2014-2015 arising out of an Order passed by Learned Commissioner of Income Tax (Appeals), Mumbai ["CIT (A)"] dated July 16, 2017 in the matter of the assessment framed by the Learned Assessing Officer ("AO") under Section 143(3) of the Income Tax Act, 1961 ("the IT Act") on December 30, 2016.

Citation :
I.T.A. No.5748/Mum/2017 A.Y. 2014-15 dated October 01, 2021

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