INCOME TAX ACT, 1961

Section 56(2)(viib)

Income from other sources - Addition under section 56(2)(viib) - Issuance of shares at premium - AO rejected DCT method adopted by assessee for valuation of shares

Assesee-company issued equiry shares having face value of Rs. 10 each at premium of Rs. 5,682 per share to resident investors. In support of premium amount collected, assessee furnished valuation report issued by a Chartered Accountant under discounted cash flow method (DCF method). AO rejected valuation report and determined valuation of shars under net asset value book value method at Rs. 1,081 per share. Accordingly, AO determined excess share premium collected by assessee and assessed the same as income under section 56(2)(viib).Held: DCF method is one of the recognized methods under rule 11UA. Accordingly, AO was not justified in rejecting DCF method without examining valuation report furnished by assessee. AO could scrutinize the valuation report and he could determine fresh valuation either by himself or by calling a determination from an independent valuer to confront assessee but the basis has to be DCF method and he could not change the method of valuation opted for by assessee. Issue was restored to AO with direction for examining valuation report furnished by assessee under DCF method.

Followed:Inovit Payment Sales (P) Ltd. v. ITO [ITA No. 1278/Bang/2018, dated 9-1-2019].

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2008-09 & 2012-13

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