| The Tax Publishers2018 TaxPub(DT) 5780 (Jp-Trib) : (2018) 172 ITD 0571 : (2018) 195 TTJ 0465 INCOME TAX ACT, 1961
Section 56(2)(viib) Rule 114A(2)(b)
Assessee was justified in taking fair market value (FMV) of shares, issued on premium applying Discount Cash Flow (DCF) method taking into consideration plant capacity, industry and market conditions sanction of loans by bank, etc., according to ICAI and DCF was correct method as per optional choice of assessee under section 114A(2)(b), hence, FMV of shares was justified.
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Income from other sources - Chargeability - Issue of shares at premium - FMV share determined applying DCF method
Assessee-company issued shares of face value of Rs. 10% at premium of Rs. 60 per shares and fair market value (FMV) valued as per Discount Cash Flow (DCF) method. AO, however, noted that premium charged by assessee was in excess and FMV was valued on net asset value (NAV) method, and accordingly addition was made in assessee's hands by AO and was charged under section 56(2)(viib). CIT(A) partly upeld order of AO. Held: If assessee was entitled to adopt DCF method to estimate fair market value, valuation submitted by assessee was fair and reasonable in accordance with rule 11UA(2). CA had considered plant capacity, industry and market conditions as prevailed in State, the sanctioning of the loan by bank were factors which formed a reasonable basis of projections. Moreover, it was not denied that valuation reports were prepared by C.A. as per the guidelines given by Institute of Chartered Accountants of India and the AO had not found any fault. Thus, there was no rational or sound basis in the order of authorities below to reject valuation report submitted by assessee based on DCF Method.
Relied:Medplus Healt Servcies (P) Ltd. v. ITO (2016) 158 ITD 105 (Hyd-Trib) : 2016 Tax Pub (DT) 1326 (Hyd-Trib), ITO v. Universal Polysack (India) (P) Ltd. ITA No 609 (JP) of 2017, dt 31-1-2018 and Vodafone M-Pesa Ltd. v. CIT (2018) 256 Taxman 240 (bom) : 2018 Tax Pub (DT) 1191 (Bom-HC) (DPB 79-83.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2013-14
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