TMI Blog2021 (9) TMI 742X X X X Extracts X X X X X X X X Extracts X X X X ..... r. AO is duty bound to examine the working of the DCF method but has no right to change the method of calculating the fair market value of the shares. Once the assessee has exercised its option of opting for DCF method, then the said method is required to be applied however the assessing officer is having the power to review the calculations and correct adoption of the parameters applied by the assessee for the purpose of arriving at valuation of the shares by applying the DCF method. Report has duly been submitted vide DCF method and the Assessing Officer has applied his own method and has computed a different value of share. Explanation to S. 56(2)(viib) of the Act provides that the fair market value (FMV) of unquoted equity shares for the purpose of 56(2)(viib) of the Act shall be the value as determined in accordance with such method as may be prescribed. The prescribed methods of valuations are given under Rule 11 UA of Income Tax Rules, 1962. In the present case, it is not denied that the assessee adopted clause (b) of Rule 11UA(2) of the Rules and accordingly obtained a Valuation Report from a Chartered Accountant. Since the law has prescribed the specific method fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been given. 4. That the addition has been confirmed against the facts and circumstances of the case. 5. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off. Brief Facts 1. The Assessee during the year under consideration, filed its return of income on 28.01.2015 declaring income of ₹ 62,070/-. The case of the Assessee was selected under CASS and notice u/sec 143(2) of the Act was issued in the case of the Assessee Company. The reason for selection of the case of the Assessee was Large share premium received during the year . 2. During the Assessment proceedings, the AO doubted the issue of shares (2,12,200 in number) at premium of ₹ 40 i.e an amount of ₹ 84,88,000/. 3. During the course of assessment proceedings, though the Assessing Officer asked the Assessee to file certificate as per Rule 11UA but, the assessee before the assessing officer had submitted that rule 11UA was not applicable to the case of the assessee. 4. As the assessee failed to comply with provisions of rule 11 UA, therefore the assessing officer had calculated the fair market value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing officer noted that the case referred and relied upon by the assessee pertained to assessment year 2009-10 prior to introduction of new provisions in the Income Tax Act i.e. Sec56 (2)(viib) read with Rule 11UA which was introduced w.e.f 29.11.2012. The case of the assessee under appeal is assessment 2014-15, therefore, the amended provisions of the Income Tax Act 1961 were applicable in the case of the assessee in the year under consideration. The assessing officer has calculated the share premium received in excess of Fair Market Value at ₹ 80,33,892/- under Rule 11UA read with sec. 56(2)(viib) of the Income tax Act 1961 and made addition of the same. During appeal proceedings, reiterated the submissions made before the assessing officer. The assessee is a private limited company. It has neither submitted the details of the parties from the share premium was received nor has given details to support its contention that the share premium was based on the Goodwill of Directors and the nature of the business of the company. The assessee has placed reliance on the decision of Mumbai bench of ITAT which pertains to assessment years prior to the amendment of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 3955/Mum/2018 order dated 28.07.2020. (PB Pg-87- 103) (f) DCIT Vs M/s Ozoneland Agro Pvt. Ltd. (PB Pg-45- 49) (g) M/s Innviti Payment Solutions Pvt. Ltd. Vs ITO in ITA No. 1278/Bang/2018 (Pb Pg-84-86) and wherein, the Hon'ble ITAT Bench has held as under:- (h) The AO can scrutinize the valuation report and the if the AO is not satisfied with the explanation of the assessee, he has to record the reasons and basis for not accepting the valuation report submitted by the assessee and only thereafter-, he can go for own valuation or to obtain the fresh valuation report from an independent valuer and confront the same to the assessee. But the basis has to be DCF method and he cannot change the method of valuation which has been opted by the assessee. Further, for scrutinizing the valuation report, the facts and data available on the date of valuation only has to be considered and actual result. 10. On the other hand, the ld. DR for the revenue had relied upon the order passed by the lower authorities. At the outset, on the enquiry of the Bench, it was fairly accepted by the DR that the paper book filed by the assessee is correct and is in accordance with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oses of sub-clause (i) of clause (a) of Explanation to clause (viib) of sub-section (2) of section 56 shall be the value, on the valuation date, of such unquoted equity shares as determined in the following manner under clause (a) or clause (b), at the option of the assessee, namely:- (a) or (a) The fair market value of the unquoted equity shares determined by a merchant banker or an accountant as per the Discounted Free Cash Flow method Hence the law has specifically conferred an option upon the assessee that for the purpose of S. 56(2)(viib) of the Act an assessee can adopt any of the methods mentioned u/r 11UA(2) of the Rules. From Rule 11UA, it is clear that either the Break Up Value Method (Clause 'a') or DCF Method (Clause 'b') can be applied for the purpose of S. 56(2)(viib) Expl. a(i) of the Act, at the option of the assessee. 14. In the present case, it is not denied that the assessee adopted clause (b) of Rule 11UA(2) of the Rules and accordingly obtained a Valuation Report from a Chartered Accountant. Since the law has prescribed the specific method for valuation i.e Discounted Cash Flow Method (hereinafter also referred as DCF ) ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
