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| The Tax Publishers2020 TaxPub(DT) 5605 (Bang-Trib) : (2021) 187 ITD 0441 INCOME TAX ACT, 1961
Section 56(2)(viib)
Rule 114A(2) provides assessee two choices of adopting either NAV method or DCF method. If assessee determines the fair market value in a method as prescribed, AO does not have a choice to dispute justification. Accordingly, determination of value of shares by adopting different method without scrutinizing valuation report furnished by assessee under DCF method was not justified and, therefore, AO was directed to examine the issue afresh.
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Income from undisclosed sources - Addition under section 56(2)(viib) - Issuance of shares at premium - AO rejected DCF method adopted by assessee and adopted NAV method
Assessee-company issued equity shares having face value of Rs. 10 each at premium of Rs. 1990 per share. It furnished valuation report in support of share premium amount collected by it, wherein shares had been valued under discounted cash flow method (DCF method). AO rejected valuation report and proceeded to determine valuation of shares under net Asset value/Book value method prescribed under rule 11UA calculated the value of shares at Rs. 253 per share and accordingly, made addition under section 56(2)(viib). Held: Rule 114A(2) provides assessee two choices of adopting either NAV method or DCF method. If assessee determines the fair market value in a method as prescribed, AO does not have a choice to dispute justification. Accordingly, determination of value of shares by adopting different method without scrutinizing valuation report furnished by assessee under DCF method was not justified and, therefore, AO was directed to examine the issue afresh.
Relied:Innoviti Payment Sales Pvt. Ltd. v. ITO [ITA No. 1278/Bang/2018, dated 9-1-2019] : 2019 TaxPub(DT) 791 (Bang-Trib).
REFERRED :
FAVOUR : Matter remanded.
A.Y. : 2016-17
IN THE ITAT, BANGALORE BENCH
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