TMI Blog2023 (10) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... of set-aside proceedings, verify the aforesaid claim of the assessee, i.e., as to whether or not the 1.82 hectares of land which was originally purchased by it at Village Karanja, Bhilai on 18.06.2013 as an agricultural land, had thereafter, been converted by diversion letter dated 09.05.2014 into land for an industrial purpose (Dal Mill.). If the claim of the assessee company is found to be in order, then the A.O. shall determine the FMV of the said land by making reference to the District Valuation Officer (DVO). Maintainability of the claim of the assessee, that as per government guidelines (Rule 7), the value of the agricultural land at Vill. Karanja, Bhilai, as per the said rule, was to be subjected to a multiple factor of 2.5 for arriving at the value of the land in case the same is converted into diverted land shall also be looked into by the lower authorities in the course of the set-aside proceedings. Set aside the order of the CIT(Appeals) and restore the matter to the file of the A.O. for fresh adjudication. Grounds of appeal raised by the assessee company are allowed for statistical purposes in terms of the aforesaid observations. - Shri Ravish Sood, Jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to on what basis it had issued 348280 shares at a premium of Rs. 14/- each. In reply, the assessee company submitted as follows: 1. Book Value per share as on 31.03.2017 was Rs. 23.88 per share on the basis the assessee company issued 348280 shares at premium of Rs. 14/- each. 2. Fair Market Value of shares is Rs. 24/- each. (Face Value Rs. 10+Premium Rs. 14)(rounded off) 3. Certificate from charted accountant alongwith calculation of book value of assets as on 31.03.2017 is enclosed. 4. On a perusal of the records, it was observed by the A.O that the assessee company had purchased agricultural land admeasuring 1.82 hectares (195835 Sq. Feet.) (Kh No. 9/12, Kh. No.405-406) at Village-Karanja, Dhamdha Road, Tehsil District: Durg for an amount of Rs. 64,77,842/- on 18.06.2013. He further observed that the assessee had claimed that usage of the aforesaid land was changed from agricultural to industrial vide order dated 13.03.2014. Also, it was observed by the A.O. that the assessee had got the aforesaid land revalued by a Registered Valuer at Rs. 3,15,00,000/- vide his valuation report dated 31.03.2016. On being queried about the 348280 shares that were issued at a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e land admeasuring 1.82 hectares as was so projected by it but the same did not find favor with the A.O, who observed as under: 7. On the basis of his aforesaid observations, the A.O. worked out the Fair Market Value (FMV) of the shares as of 31.03.2017 at Rs. 13.30/- (R/o. Rs. 13/-). Accordingly, the A.O., after adopting FMV of the shares at Rs. 13/- per share, therein, vide his order passed u/s. 143(3) r.w.s. 143 (3A) 143(3B) dated 15.04.2021 worked out the excess share premium charged by the assessee company u/s.56(2)(viib) at Rs. 38,31,080/- and determined the income of the assessee company at Rs. 38,31,080/-. 8. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) but without success. The CIT(Appeals) found no infirmity in the view taken by the A.O as regards the addition made u/s.56(2)(viib) of the Act of Rs. 38,31,080/- as well as the very basis for determining the FMV of shares @ Rs. 13/- per share as against Rs. 24/- per share charged by the assessee company and, observed as under: The Assessing Officer erred in making addition of Rs. 38,31,080/- on account of alleged excess consideration received against issue of shares exceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,080/- [3,48,280 shares x Rs. 11/- per share being difference between Rs. 14/- Rs. 3/-] was added by AO invoking sec. 56(2)(viib). It is submitted that the difference has arisen because of-the reason that the rate of land per acre (Rs. 70 lakh per acre), accepted by the AO, has been multiplied by him with the area of land in hectare instead of in acres. When the rate applied by the AO is per acre, then the area of land in acres should have been multiplied. It is undisputed that area of land was 1.82 hectare, which is equal to 4.4973 acre and if this area is multiplied by the accepted rate of Rs. 70 lakh per acre, it will give value of Rs. 3,14,81,100/- which, when rounded of comes to Rs. 3,15,00,000/- which is the value taken by the valuer/appellant. Therefore, the entire difference in working out the premium gets washed out only on account of wrong multiplication done by the AO. At the cost of repetition, we may reiterate that the rate per acre has been multiplied by the AO with the area in hectares. Shares issued at the value worked out as per Rule 11 UA(2)(a) And Justification of value of land of Rs. 70 lakh per acre. The only dispute raised by the AO in the calc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating the fair market value of Rs. 13/-per share in place of Rs. 24/- per share, disregarding legal and cogent evidence available on record. The addition made by AO is arbitrary, baseless and not justified. 5.3.(i) In the assessment, the AO had given valuation of shares and in doing so, the AO found that the assessee had claimed on excessive side Rs. 48,75,920; thus working out to disallowance of Rs. 38,31,080 under section 56(2)(viib) of the Act. 5.3.(ii). The appellant submitted that : In this regard, necessary explanation has already been submitted vide para no. 12, to 14. above in respect of ground no. 1 wherein it has been established that the FMV of the shares was Rs. 24/- per share only and the AO was not justified in bringing ti down of Rs. 13/- per share. Even otherwise, the calculation by which the AO has worked out the FMV at Rs. 13/- per share is wholly incorrect as the rate of acre has been multiplied with the area of land in hectare whereas the area in acre should have been multiplied and fi it was done so, the FMV would have come to Rs. 24/- per share only. This point has been elaborated in explanation given in respect of ground no..1 . 5.3.(iii). This grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough the copy of the report of valuation in Form O-1 dated 31.03.2016 of the government-approved valuer, Pages 27 to 31 of APB. Rebutting the value adopted by the A.O., it was submitted by the Ld. AR that he had wrongly valued the land by taking the same as agricultural land and adopting a value of Rs. 63.13 lacs per hectare. Carrying his contention further, it was submitted by the Ld. AR that as per the valuation report of the government-approved valuer, the value of the aforesaid land, i.e., 1.82 hectares at Vill. Karanja was taken at 70 lacs per acre. Referring to the anomaly in the valuation carried out by the A.O., the Ld. AR submitted that not only had he erred in taking the land of the assessee company as agricultural land but also had wrongly valued the same at a substantially low amount, i.e., at Rs. 63.13 lac per hectare as against that as was claimed by the assessee, i.e., at Rs. 70 lac per acre. The Ld. A.R had drawn my attention to the government guidelines rate wherein the value of the agricultural land at Karanja, Bhilai (Sr. No.12) was stated at Rs. 63.13 lacs per hectare. The Ld. AR submitted that as the land in question, pursuant to a diversion letter dated 09.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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