Keep Learning Resources (P) Ltd. v. ITO

Case Laws Analysis
REFERRED Narang Access (P) Ltd. v. Dy. CIT 2019 TaxPub(DT) 6991 (Mum-Trib)
REFERRED CIT v. Excel Industries Ltd. 2013 TaxPub(DT) 2414 (SC)
REFERRED Radhasoami Satsang v. CIT 1992 TaxPub(DT) 0858 (SC)

SUBSCRIBE FOR FULL CONTENT


The Tax Publishers2024 TaxPub(DT) 836 (Mum-Trib) IN THE ITAT MUMBAI ABY T VARKEY, J.M. & S. RIFAUR RAHMAN, A.M. Keep Learning Resources (P) Ltd. v. ITO ITA No. 1693/MUM/2023 9 February, 2024 Assessee by: Kapil Sanghvi Department by: P.D. Chougule ORDER *S. Rifaur Rahman A.M.* 1. This appeal is filed by the assessee against the order of Learned Commissioner (Appeals), National Faceless Appeal Centre, Delhi (hereinafter in short Ld. CIT(A)) dated 14-3-2023 for the Assessing Year 2017-18. 2. Brief facts of the case are, assessee filed its return of income on 31-10-2017 declaring loss of ₹.5,73,140. The return was processed under section 143(1) of Income-tax Act, 1961 (in short Act) accepting the return. Subsequently, the case was selected for scrutiny under CASS for one of the reason large share premium received during the year (verify applicability of section 56(2)(viib) of the Act). Accordingly, notices under section 143(2) and 142(1) of the Act were issued and served on the assessee, in response assessee filed the details through e-proceedings. 3. The assessee is engaged in providing technology enhancement in respect of legal courses for training and skilling. During the course of assessment proceedings, Assessing Officer observed that assessee is issued shares with huge premium during the year under consideration. It was observed that the shares were issued to three (3) shareholders with the face value of ₹.10 and premium of ₹.495.58 per share. During the course of assessment proceedings, the assessee was asked to justify the issue of shares at premium. 4. In response, assessee vide letter dated 4-12-2019 filed the submissions on 18-12-2019 along with the valuation report dated 2-9-2016. The Assessing Officer has reproduced the part of valuation report at Page No. 4 and 5 of the assessment order. After considering the valuation report the Assessing Officer observed that the valuer has adopted the Net Asset Value Method and revalued the investments shown in the books of the assessee company which is in the form of equity investments in M/s. Mylaw Learning Resources Private Limited (in short MLRPL) applied Discounted cash flow Method. Further, he observed that the assessee company held 49,999 equity shares of ₹.10 each fully paid up in MLRPL valued at ₹.3,48,25,690. He Further, observed that for the purpose getting fair market value of the equity shares of the assessee company on which the assessee has charged premium, the assessee has taken value of assets as per its books except the value of investments made in the equity shares of MLRPL. 5. The Assessing Officer after perusing the submissions of the assessee in respect of valuation of shares of the assessee company based on which premium has been charged, he observed that the assessee has adopted Net Asset Value Method for arriving the fair market value of the equity shares of the assessee company as per section 56(2)(viib) read with Rule 11UA Income Tax Rules, the assessee has a choice to adopt either Net Asset Value Method or Discounted cash flow Method. He observed that while arriving fair market value of equity shares of the assessee company, the assessee has adopted Net Asset Value Method. Based on the formula given in Rule 11UA of Income Tax Rules. He observed that assessee has adopted book value of the assets for the purpose valuation of the shares except investments shown in the books of the company which has been revalued and its fair value was taken as per Discounted cash flow Method for arriving the valuation of the equity shares of the assessee company. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2024 TaxPub(DT) 836 (Mum-Trib)

IN THE ITAT MUMBAI

ABY T VARKEY, J.M. & S. RIFAUR RAHMAN, A.M.

Keep Learning Resources (P) Ltd. v. ITO

ITA No. 1693/MUM/2023

9 February, 2024

Assessee by: Kapil Sanghvi

Department by: P.D. Chougule

ORDER

S. Rifaur Rahman A.M.

1. This appeal is filed by the assessee against the order of Learned Commissioner (Appeals), National Faceless Appeal Centre, Delhi (hereinafter in short Ld. CIT(A)) dated 14-3-2023 for the Assessing Year 2017-18.

2. Brief facts of the case are, assessee filed its return of income on 31-10-2017 declaring loss of ₹.5,73,140. The return was processed under section 143(1) of Income-tax Act, 1961 (in short Act) accepting the return. Subsequently, the case was selected for scrutiny under CASS for one of the reason large share premium received during the year (verify applicability of section 56(2)(viib) of the Act). Accordingly, notices under section 143(2) and 142(1) of the Act were issued and served on the assessee, in response assessee filed the details through e-proceedings.

3. The assessee is engaged in providing technology enhancement in respect of legal courses for training and skilling. During the course of assessment proceedings, Assessing Officer observed that assessee is issued shares with huge premium during the year under consideration. It was observed that the shares were issued to three (3) shareholders with the face value of ₹.10 and premium of ₹.495.58 per share. During the course of assessment proceedings, the assessee was asked to justify the issue of shares at premium.

4. In response, assessee vide letter dated 4-12-2019 filed the submissions on 18-12-2019 along with the valuation report dated 2-9-2016. The Assessing Officer has reproduced the part of valuation report at Page No. 4 and 5 of the assessment order. After considering the valuation report the Assessing Officer observed that the valuer has adopted the Net Asset Value Method and revalued the investments shown in the books of the assessee company which is in the form of equity investments in M/s. Mylaw Learning Resources Private Limited (in short MLRPL) applied Discounted cash flow Method. Further, he observed that the assessee company held 49,999 equity shares of ₹.10 each fully paid up in MLRPL valued at ₹.3,48,25,690. He Further, observed that for the purpose getting fair market value of the equity shares of the assessee company on which the assessee has charged premium, the assessee has taken value of assets as per its books except the value of investments made in the equity shares of MLRPL.

5. The Assessing Officer after perusing the submissions of the assessee in respect of valuation of shares of the assessee company based on which premium has been charged, he observed that the assessee has adopted Net Asset Value Method for arriving the fair market value of the equity shares of the assessee company as per section 56(2)(viib) read with Rule 11UA Income Tax Rules, the assessee has a choice to adopt either Net Asset Value Method or Discounted cash flow Method. He observed that while arriving fair market value of equity shares of the assessee company, the assessee has adopted Net Asset Value Method. Based on the formula given in Rule 11UA of Income Tax Rules. He observed that assessee has adopted book value of the assets for the purpose valuation of the shares except investments shown in the books of the company which has been revalued and its fair value was taken as per Discounted cash flow Method for arriving the valuation of the equity shares of the assessee company.