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2023 (3) TMI 553 - ITAT CHANDIGARHRevision u/s 263 - PCIT observed that, AO had failed to examine and verify the issues related to share premium received and interest earned, which issues had remained unaddressed - justification behind rejecting the declared value of the shares - HELD THAT:- We are of the considered opinion that Assessee followed the DCF Method for valuing the shares, whereas the Ld. PCIT utilised the NAV Method to do so.This action of the Ld. PCIT is in direct contravention of the provisions of Explanation (a)(i) to section 56(2)(vii) of the I.T. Act read with rule 11UA(2)(b) of the I.T. Rules. AO could not have changed the method of valuation opted by the Assessee, in view of the statutory mandate of rule 11UA(2) of the Rules.The above is in keeping with the caselaws discussed hereinabove. Therefore, there was no error in the Assessing Officer's Order calling for revision under section 263 of the I.T. Act. Whether or not the AO inquired into the interest income earned by the Assessee on which, TDS was claimed, whereas as per the Ld. PCIT, no interest income was offered to tax by the Assessee? - In the present case, the Assessee's hotel was under construction - Had the fixed deposits not been made, the Assessee would not have been able to obtain bank guarantee against the EPCG licenses availed while importing machinery for its hotel, which was under construction. The fixed deposits, as such, were made to facilitate the construction of the Assessee's hotel, i.e., its fixed asset. The Assessee's arrangement with regard to the interest received on the fixed deposits was an arrangement intrinsically connected with the construction of the Assessee's hotel. Assessee adjusted the interest received, reducing it from the cost of construction of its hotel. The interest was set off against the total cost of capitalization during the construction period. The interest receipt, therefore, went to reduce the cost of construction. The fixed deposits and the interest received by the Assessee thereon were directly linked with the activity of setting up the hotel of the Assessee. The interest is linked inextricably with the process of setting up of the capital structure of the Assessee-company. It must, hence, in respectful conformity with 'Bokaro Steel' [1998 (12) TMI 4 - SUPREME COURT] be viewed as a capital receipt going to reduce the cost of construction. Evidently, therefore, the view taken by the AO was a possible view and the order passed by the AO in this regard was not erroneous, much less prejudicial to the interests of the Revenue. This, though, the Ld. PCIT failed to take into consideration while passing the impugned order. Accordingly, on this issue also, the order of the Ld. PCIT is reversed and the assessment order is revived. To conclude, qua both the issues, the order of the Ld. PCIT is set aside and reversed and the assessment order is revived. The grievance of the Assessee allowed.
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