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2018 (10) TMI 1391 - AT - Income TaxAddition u/s 56(2)(vii)(c) - receiving shares and securities and the consideration for the same is less than the aggregate Fair Market Value (FMV) of these shares and securities - determination of FMV as per Rule 11UA(1)(c) r.w. Rule 11U - drawing up a balance sheet as on valuation date or previous audited balance sheet is to be taken as the base. - CIT-A held that AO has done the next best thing by adopting a pro rata average of valuation of shares of GEPL as on 31.03.2010 and 31.03.2011 and upheld the order of the AO in taxing the differential amount of ₹ 1.05/- per share totaling to ₹ 31,50,000/- u/s 56(2)(vii)(c). Held that:- CIT(A) has rightly observed that “there was nothing preventing the appellant from drawing up the balance sheet of GEPL as on that date for the limited purpose”. As GEPL is a closely held company, we concur with the above finding of the Ld. CIT(A). The meaning of “balance sheet” has been given in Rule 11U(b) of the Rules and the same has been substituted by the IT (15th Amendment) Rules, 2012, w.e.f. 29.11.2012 AO has rightly arrived at the FMV per share as on 22.06.2010 at ₹ 31.05/- as worked out by the assessee. Also he has rightly followed Rule 11U as applicable for the FY 2010-11 relevant to the AY 2011-12. To hold otherwise would be to exalt artifice above reality and to deprive the statutory provision in question of all serious purpose. - Decided against assessee.
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