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2019 (1) TMI 1635 - AT - Income TaxAddition u/s 56(2)(viib) - valuation of equity shares / FMV - excess share premium amount received by the assessee company - HELD THAT:- The valuation of the property at Kolkata is the major part of the total assets and therefore, the correct and true value of the property at Kolkata is inevitable part of the process of the fair market value of the shares issued by the assessee. AO has taken the value of the said property as per the book value which is shown at the cost price and not at the market value whereas the CIT (A) has conducted some verification at his level and found that the valuation of the property after applying 32% discount on account of encumbrance comes to ₹ 18,23,74,333/-. The fair market value of the shares as per clause (ii) of Explanation (a) to section 56(2)(viib) has to be taken based on the value of the assets including intangible assets of the company as on the date of issue of shares which connotes that the value as on the date of issue and not as per the book value or at cost. Hence we find merit in the submission of the A/R that fair market value of the shares has to be computed by taking the market value of the assets of the assessee company as on the date of issue of shares. We find that the land/property situated at Kolkata is not free from encumbrances as assessee had admitted that there is encroachment in the said land and, therefore, it becomes essential to value the said property after finding out the actual status of the land/property in question. The issue requires a proper verification and enquiry at the level of the AO and in case the AO does not agree with the value claimed by the assessee, the matter is required to be referred to the DVO for the purpose of determining the value of the assets of the assessee as on the date of issue of shares. Since the land in question is situated at Kolkata, therefore, a proper enquiry is required to be conducted to find out the true and correct value of the land at the hand of the assessee. Accordingly, the matter of fair market value of the shares as per the method provided under clause (ii) of Explanation (a) to section 56(2)(viib) is set aside to the record of the AO for fresh adjudication in terms of the above order.
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