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Tax Publishers
Reversionary powers under section 263 alleging
wrong value adopted for FMV as per Section 56(2)(viib)
Facts:
Assessee computed FMV for issuing shares taking into
account goodwill basing 5 year purchase of past 3 year average profits + 2
prospective years. This was explained to in the assessment where the AO chose
not to disturb the issue/allotment price. PCIT invoked Section 263 and
questioned the same alleging that the inclusion of intangible goodwill was
erroneous and prejudicial to the interests of the revenue and the difference in
the calculated FMV ought to have been added under section 56(2)(viib). On
higher appeal -
Held in favour of the assessee that the PCIT was taking one
plausible view thus the revision was uncalled for.
Ed. Note: The way the
goodwill has been computed and whether in a company this needs to be taken
separately or is part and parcel of the embedded value are all topics worthy of
discussion. Where DCF method is adopted the goodwill is built into the pricing
one way or other. On the other hand while the adjusted book value as per rule
11UA is adopted it might need an adjustment as the same is not reflected in the
formula given by the rules or is it that the rules do not accept goodwill or
any other intangible asset in its scope?
Case: Karamveer
Electronics Ltd. v. Pr. CIT 2024 TaxPub(DT) 1719 (Del-Trib)
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