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2020 (1) TMI 1012 - ITAT VISAKHAPATNAMValuation of shares invoking Rule 11UA of the Income Tax Rules, 1962 and resultant addition made u/sec. 56(2)(vii)(c)(ii) - difference in FMV of the shares and the consideration paid by the assessee - DR argued that the shares were not only allotted to the assessee but also allotted to others - HELD THAT:- There is no dispute that the assessee and other shareholders are close relatives, therefore the consideration received rather excess consideration passed on from the share of his brother is exempt from taxation u/sec. 56(2)(viii)(c)(ii) of the Act. Thus, we hold that the difference in FMV of the shares and the consideration paid by the assessee is squarely covered by the exemption clause provided u/sec. 56(2)(vii) of the Act and case law relied on by the assessee in the case of Sri Kumar Pappu Singh [2018 (12) TMI 525 - ITAT VISAKHAPATNAM] is squarely applicable in the assessee‘s case. DR argued that the shares were not only allotted to the assessee but also allotted to others and submitted that the case law of Kumar Pappu Singh has no application in this case. We are unable to accept the argument of the Ld.DR, since, prior to the allotment of shares on 05/04/2013 the share holders are only the assessee and his brother. In the fresh allotment apart from the assessee some applicants were allotted the shares. Therefore whatever the shares allotted to the assessee was from the interest of his brother who is a close relative. Hence, to the extent of shares allotted to the assessee the same is covered by the decision of this tribunal. Thus, we hold that there is no case for making any addition for allotment of shares allotted on 05/04 2013. Accordingly, we set aside the orders of the authorities below on this issue and delete the addition made by the Assessing Officer. FMV of the shares allotted to the assessee on 26/03/2014 - contention of the assessee is that for arriving at the FMV of the shares, the book value of the shares required to be adopted for determination of FMV of the share. Accordingly, the Assessing Officer arrived at the value of the share at ₹ 14.48 and the ld. CIT(A) arrived at ₹ 12.02. Though, the valuation means the date of property or consideration received as per Rule 11UA. This issue is considered by the coordinate bench in Sadhvi Securities Ltd [2019 (7) TMI 1074 - ITAT DELHI] and held that in case the balance sheet was not drawn up on the date of allotment, the previous balance sheet which was approved in the AGM has to be considered for valuation of FMV of the shares. For arriving the FMV of shares previous Balance sheet which is audited and approved in the AGM has to be taken in to consideration, before the allotment of shares. Accordingly, we set aside the order of ld. CIT(A) on the shares allotted on 26/03/2014 and confirm the addition. Thus, this ground of appeal raised by the Revenue is allowed partly.
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