‘Source of Source’ Requirement Restricted to Share Capital, Excludes Unsecured Loans and Applies Prospectively from AY 2023-24: ITAT

The ITAT has ruled that the source-of-source requirement for share capital excludes unsecured loans and applies prospectively from the assessment year. The decision clarifies that the verification of the origin of share capital should focus on the ultimate source of funds rather than tracing back every intermediary. This ruling is important for taxpayers and businesses involved in raising capital, as it simplifies the process and reduces the complexity of complying with tax regulations. The ruling also highlights the need for clear and direct evidence of the source of funds in corporate transactions. This interpretation is expected to ease compliance for companies and help streamline the process of capital raising.