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2022 (6) TMI 1340 - AT - Income TaxAddition u/s.56(2)(viib) - excess consideration received on allotment of equity shares over and above fair market value as on date of allotment is income of the assessee - price charged for allotment of equity shares, including premium - HELD THAT:- We ourselves do not subscribe to the reasons given by the AO for simple reason that the assessee has determined value of shares as per discounted cash flow method, as per which fair market value of shares as on date of issue was at Rs.109.21 per share. Assessee has determined such valuation on the basis of discounted cash flow of subsequent years by taking into account project under implementation and its relevance, including intangibles possessed in the line of business carried out by the assessee. Assessee has also justified fair market value determined as on date of allotment of shares by filing necessary details to establish fair market value of the shares as per net asset value method as at end of the assessment year 2014-15, as per which value per equity share is at Rs.146.3 per share which is higher than issue price at Rs.109.21 per share, which means, fair market value determined by the assessee at the time of allotment of shares is not hypothetical, but intrinsic value of the share based on its future earning capacity. Therefore, we are of the considered view that even on merits, the assessee has justified price charged for allotment of equity shares, including premium. In this case, the assessee has filed fair market value of the shares worked out as at end of the impugned assessment year on net asset value method, as per which, share price has been worked out at Rs.147.36 per share which is much higher than issue price of Rs.109.21 per share. Assessee had also allotted 5 lakhs equity shares to non-resident shareholder M/s.Sojitz Corporation, Japan, at issue price at Rs.450.10 per share, which includes premium of Rs.440.10 per share. If you compare, premium charged on resident shareholders, when compared to non-resident shareholder, premium charged to resident shareholders is much below to premium charged on non-resident shareholders. It is very clear that the assessee has justified premium charged on issue of shares with necessary evidences, including fair market value of the shares as on date of issue. We are of the considered view that the AO has completely erred in making additions towards securities premium u/s 56(2)(viib) - CIT(A), after considering relevant facts has rightly deleted additions made by the AO. Hence, we are inclined to uphold findings of the CIT(A) and dismiss appeal filed by the Revenue.
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