Nov 24, 2018
ITAT ruling on premium earned on preference shares may benefit start-ups
In what could benefit many start-ups in the country, the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that premium earned on allotment of preference shares by a loss-making entity cannot be taxed. The tribunal said the valuation of shares is not relevant for determining the genuineness of the transaction. The ruling, pertaining to Section 68 of the Income Tax Act, stated that the assessing officer (AO) can only verify the nature and source and not question the genuineness of the premium on allotment of preference shares.