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2022 (11) TMI 1362 - AT - Income TaxAddition u/s 56(2)(viib) - determination of FMV of the shares - allotment of shares at premium - HELD THAT:- On a reading of Explanation to section 56(2)(viib) it is very much clear that the FMV of shares shall be either the value determined u/r 11UA or based on the value of its assets, including, intangible assets on the date of issue of shares, whichever is higher. Assessee can determine the FMV by adopting either of the two methods as provided under the Statute. The expression “substantiated by the company to the satisfaction of the AO” as used in clause (a)(ii) of Explanation to section 52(b)(viib) does not speak of any subjective satisfaction but has to be considered objectively, keeping in view the value of the assets on the date of issue of shares. Assessee has proved that the value of the asset, i.e., the land at Delhi as per circle rate is more than Rs. 26.75 crores determined by the registered valuer. That being the factual position emerging on record, allotment of shares at Rs. 1,500/- per share must be considered to be the FMV on the date of sale and not high and excessive compared to the FMV. Assessee had entered into similar transaction with its holding company in assessment year 2014-15 wherein, shares having face value of Rs. 100 per share were allotted to the holding company for a premium of Rs. 1799 per share. While considering the issue relating to similar addition made by the AO u/s 56(2)(viib) first appellate authority has deleted the addition taking note of the fact that the value of land held by the assessee as per the circle rate is Rs. 42 crores. - No reason to sustain the addition - Appeal of assessee allowed.
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