IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER Assessment Year: 2017-18 Asst. Commissioner of Dewanchand Ramsaran Income-tax 6(1)(1), Industries Pvt. Ltd.

Room No. 504, 5^th floor, Flat No. 15 4^th floor, Krishna Aayakar Bhavan, M.K. Road, Vs. Niketan, Sion Main Road, King Mumbai-400020. Circle, Mumbai-400022.

(PAN : AABCD7193H)

(Appellant) (Respondent)

Present for:

Assessee : Ms. Aarti Sathe a/w Ms. Aasavari Kadam Revenue : Shri R. R. Makwana, Addl. CIT Date of Hearing : 21.01.2025 Date of Pronouncement : 21.04.2025

O R D E R

PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:

This appeal filed by the Revenue is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, vide order no. ITBA/NFAC/S/250/2023-24/1061827856(1), dated 06.08.2024, passed against the assessment order by Assessing Officer, Circle 6(2)(1), Mumbai, u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 25.12.2019, for Assessment Year 2017-18. 2. Grounds taken by the Revenue are reproduced as under:

1. Whether on the facts and in the circumstance of the case and in law, the Ld. CIT(A) has erred in granting relief to the assessee company by deleting the disallowance/addition of Rs.10,17,05,000/- made by the A.O u/s 28(iv) of the Income tax Act, despite the fact that though the share premium was received in the F.Y. 2011-12 & 2012-13, no shares were allotted against them as late as March 2021.

2. The Appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.

3. Brief facts as culled out from records are that assessee carries on its business activity in the field of charter hiring of drilling rigs and work over rigs. It obtained secured loans in foreign currency to finance the purchase of rigs, which were employed into its business. However, it went into financial trouble when one of its contracts, for which it had purchased additional rigs got cancelled much before the end of its contract period due to recession in the oil industry, and assessee did not have sufficient funds to finance the loan repayment. Assessee had to sell its rigs in order to service the interest and principal payment on these loans. Owing to this financial crisis, business came to standstill.

3.1. Assessee filed its return of income on 31.03.2018, reporting total income at Nil after setting off of the business loss and unabsorbed depreciation. In the course of assessment proceedings, ld. Assessing officer asked assessee, inter alia, to show cause as to why share application money of Rs. 10,17,05,000/- should not be added to the total income. Assessee filed its reply wherein, inter alia, confirmation from all parties from whom share application money was received along with their balance sheets as at 31s March, 2017 and Income Tax Return filed acknowledgments were submitted. Details furnished for each of the share applicant is tabulated as under:

3.2. Assessee also highlighted the details shareholding pattern of its equity share capital as on 31.03.2017 as reported in its audited financial statement to demonstrate that all of them are existing shareholders of the assessee. The details are tabulated below:

3.3. In its explanation, as mentioned earlier, it was submitted that assessee went into financial crisis and did not have sufficient funds to meet its interest payments on secured loans. Hence, it obtained share application money from its existing members and their related parties in order to finance the interest payments. These monies were not taken from any outside third party, but from existing members and parties belonging to the same group. The said amounts were paid by them to the assessee out of their own personal funds which was corroborated by the respective balance sheets and confirmation letters placed on record. According to the assessee, the Makad family infused money in the form of share app