DCIT 1(3)(2), MUMBAI VS VARSITY EDUCATION MANAGEMENT
I.T.A. NO. 6991/MUM/2016
24-10-2019

S. 68 Bogus share premium: The AO cannot assess the share premium as income on the ground that it is "excessive". The share premium worked out in the Valuation Certificate is the minimum amount that can be collected by the assessee under RBI regulations. There is no bar on collecting higher amount as share premium. There are several factors that are taken into consideration while issuing the equity shares to shareholders/investors, such as Venture capital funds and Private Equity funds. The premium is determined between the parties on the basis of commercial considerations and cannot be questioned by the tax authorities. The AO is not entitled to sit on the arm chair of a businessman and regulate the manner of conducting business (All judgements considered).