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Share Premium is Capital Receipt, Not taxable

The division bench of the Bombay High Court in Commissioner of Income Tax-3, Civil Lines, Nagpur vs. M/s.Apeak Infotech Nagpur has held that receipt from share premium on issue of share by the Assessee-Companies cannot be taxed as profit and gains of business under Section 28(iv) of the Income Tax Act since the same amount to capital receipt.

The decision was in the light of decisions in Vodafone India Services Pvt. Ltd. vs. Addl. CIT and the apex Court ruling in M/s G.S. Homes & Hotels P.Ltd. In the instant case, Assessees, during the assessment year 2012-13 had increased its Share Capital by issuing its shares at a premium. While completing assessment, AO observed that Assessee did not have any significant business at the time of issue of share capital to warrant receipt of share premium and added the share premium received to its income as profits and gains of business under Section 28(iv) of the Income Tax Act.

Article referred: http://www.taxscan.in/share-premium-capital-receipt-not-taxable-bombay-hc-read-judgment/9002/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+Taxscan+%28Top+Stories+%E2%80%93+Taxscan+%7C+Simplifying+Tax+Laws%29

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