ITAT Deletes Rs. 134.99 Crore Addition on Share Capital Received From Non-Resident Holding Company Via Banking Channel

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has deleted an addition of Rs. 134.99 crore made under Section 68 of the Income-tax Act in respect of share capital and share premium received from its non-resident holding company. The bench of Challa Nagendra Prasad (Judicial Member) and S. Rifaurrahman (Accountant Member) has observed that where the share capital is received from an existing foreign holding company through proper banking channels and after compliance with RBI and FDI regulations, the transaction cannot be treated as unexplained cash credit merely on technical objections raised by the Assessing Officer. The dispute pertained to Assessment Year 2018-19. The assessee had filed its return declaring income of about ₹11.01 crore. During scrutiny assessment, the Assessing Officer examined the substantial increase in share capital and the international transactions involving guarantees. During the relevant year, the company issued 7,16,13,202 shares and received ₹71.61 crore towards share capital and ₹63.38 crore towards share premium, aggregating to ₹134.99 crore. The shares were issued to its foreign shareholders, namely Herba Foods SLU Spain and Herba Rice Mills SLU Spain. Buy Now: Income Tax Judgments E-Compilation : April 2026 The Assessing Officer sought documents such as confirmations, bank statements, ITRs, balance sheets of shareholders and share issuance certificates. According to the department, the assessee failed to furnish adequate supporting documents and therefore the entire amount was added under Section 68 as unexplained cash credit. Before the Dispute Resolution Panel (DRP), the assessee argued that the shares were issued only to existing shareholders and the shareholding pattern remained unchanged. It was also contended that the shareholders were non-resident entities and therefore the extended “source of source” requirement under the proviso to Section 68 was not applicable. The assessee relied on judicial precedents including Vodafone India Ltd. and Syntensia Network Security India Pvt. Ltd. The DRP observed that the Assessing Officer had not properly examined the evidences placed on record and directed the officer to pass a speaking order after considering the material submitted by the assessee. However, in the final assessment order, the Assessing Officer reiterated the findings of the draft order and sustained the addition. The assessee thereafter approached the ITAT. Before the Tribunal, the assessee produced extensive documentary evidence including valuation reports, share certificates, bank statements, Foreign Inward Remittance Certificates (FIRCs), shareholder confirmations and RBI/FDI compliance documents. The assessee also highlighted that the transactions had been examined by the Transfer Pricing Officer (TPO), who had not raised any adverse inference. The ITAT noted that the share capital had been received from the non-resident holding company which already held almost the entire shareholding of the assessee company. The Tribunal observed that the identity and creditworthiness of the shareholders could not be doubted in such circumstances. The Tribunal further observed that the funds were received through banking channels, backed by FIRC certificates and in compliance with RBI regulations governing foreign direct investment. It also accepted the valuation report supporting the share premium charged by the assessee. Criticising the approach of the Assessing Officer, the ITAT observed that despite specific directions from the DRP to verify the evidence and pass a reasoned order, the officer merely repeated the findings of the draft assessment order without proper examination of the documents. The Tribunal held that the assessee had successfully proved the identity of the shareholders, their creditworthiness and the genuineness of the transaction. It therefore deleted the addition of ₹134.99 crore made under Section 68. The ITAT, however, dismissed a minor ground relating to double disallowance of employees’ contribution towards ESI/PF as not pressed. Case Details Case Title: Ebro India Pvt. Ltd. Versus ACIT Citation: JURISHOUR-1134-ITA-2026(DEL) Case No.: ITA No.1291/DEL/2022 Date: 06.05.2026 Counsel For Appellant: Rohit Jain, Advocate Counsel For Respondent: Anima Barnwal, CIT DR Click Here To Read Order Read More: CESTAT Allows Amendment of Bill of Entry for Refund Claim on Excess Customs Duty Paid Due to Missed Exemption

ITAT Deletes Rs. 134.99 Crore Addition on Share Capital Received From Non-Resident Holding Company Via Banking Channel

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