M/s. Wellspring Healthcare Private Limited vs. DCIT

Parties Involved

Facts Summary

M/s. Wellspring Healthcare Private Limited, an assessee engaged in providing healthcare services, declared a loss of Rs.75,72,18,170/- for the Assessment Year 2017-18. The Assessing Officer (AO) scrutinized the case and found discrepancies in the share allotment details. The AO issued notices under section 142(1) of the Income Tax Act, 1961, asking for documentary evidence regarding the creditworthiness of the shareholders. The assessee responded but did not provide satisfactory evidence. Consequently, the AO disallowed the amount of Rs.75,66,23,141/- credited in the books of accounts against the allotment of shares and added it to the total income of the assessee under section 68 r.w.s. 115BBE of the Act. The assessee challenged this decision before the Commissioner of Income Tax (Appeals), who affirmed the AO's decision. The assessee then appealed to the Income Tax Appellate Tribunal (ITAT), raising issues regarding the disallowance of the share capital and premium as income.…

Legal Issues

• 1. Whether the share capital received from shareholders on issue of Compulsory Convertible Preference Shares (CCPS) should be considered as income under section 68 of the Income-tax Act, 1961.
• 2. Whether the share premium received from resident shareholders on issue of CCPS should be considered as income under section 56(2)(viib) of the Income-tax Act, 1961.

Judgment Outcome

Decided in favour of Assessee.

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