Bharat Pvt. Ltd., a closely held company, has issued 20000 equity shares to Naman, a non-resident Indian, on 31st January, 2022 at an issue price of ₹75 per share, Fair Market Value of the equity shares was ₹45 per share

As per section 56(2)(viib) of the Income Tax Act, 1961, where a company, not being a company in which the public are substantially interested, receives in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the fair value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be deemed as income from other sources. In this case, Bharat Pvt. Ltd. is a closely held company. The issue price of shares is ₹75 per share, while the Fair Market Value (FMV) is ₹45 per share. The excess consideration received is ₹30 per share (₹75 - ₹45). However, the crucial point is that the equity shares had been issued to Mr. Naman, a Non-resident Indian . The provision of section 56(2)(viib) is applicable only in case of consideration received from a resident person . Therefore, the assessing officer is not justified in making an addition under section 56(2)(viib) of the Income Tax Act, 1961, because the shares were issued to a non-resident person.