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2019 (9) TMI 553 - AT - Income TaxAddition u/s 56(2)(viib) - assessee has received an excess amount on issue of shares qua the FMV as per Rule 11UA of IT Rules - CIT(A) consequently justified the basis adopted by the AO for rejection of the FMV determined by the assessee and approved the determination of FMV on the basis of book value of assets and liabilities under Rule 11UA of the Rules - HELD THAT:- 0ne of the grounds taken for rejecting the basis of determination of FMV is that no accounting entry has been passed in respect of difference between the FMV of the immovable property at the relevant point of time in the books of accounts. No merit in this line of reasoning adopted by the lower authorities. It is well settled that even where the assessee fails to make necessary entries in the books of accounts, it will not operate as a bar for claiming benefits by way of deduction etc. as was held in the case of Kedarnath Jute Manufacturing Co. Ltd. vs. CIT [1971 (8) TMI 10 - SUPREME COURT] Secondly, the second limb of Explanation (a) itself provides for determination of FMV based on value of underlying assets. As a corollary, the value once substantiated would be replaced with the book value for the purposes of FMV regardless of the book entries in this regard. This basis adopted by the lower authorities therefore does not hold any water. Another allegation made by the CIT(A) that the action of the assessee company is marred by adhocism and beset with arbitrariness. CIT(A) has observed that project was ultimately set up at Dahej despite acquisition of land at Padra which defies logic and gives an impression of adhocism. We fail to understand the purport of such observation for determination of FMV. The intrinsic valuation of the land as sought to be demonstrated by the assessee was required to be looked into to give effect to Explanation (a) below Section 56(2)(viib). The manner in which the assessee was required to run its business is totally within the domain of the assessee and has no bearing on applicability of Section 56(2)(viib) - unable to see substance in the allegation of arbitrariness in the conduct of the assessee. What the assessee has attempted to demonstrate that the market value of Padra land and 45% of jantri value of Dahej land itself is sufficient to justify the premium collected. The valuation report is not an evidence in itself but merely an opinion of an independent having regard to totality of expert facts and circumstances existing on the date of valuation. So long as the facts and circumstances exist, the presence or otherwise valuation report per se has no effect. Both the lower authorities have failed to controvert the value adopted for land parcels in departure with the book value. No rebuttal of the fact towards the value is on record. The Revenue authorities are clearly guided by irrelevant consideration while holding against the assessee. The AO himself in the subsequent year has disputed the higher valuation of ₹ 46/- and unequivocally adopted ₹ 33/- as fair value. The assessee has also been able to demonstrate the arm’s length transaction and unison of two different groups bringing different capabilities and expertise for the furtherance of business. The peripheral evidences in the form of interest shown by giant groups like Tata are significant and underlie the bonafides in the fair valuation for issuance of fresh shares. There is another overwhelming factor subsisting in the case to justify the fair value. The existing promoters have also subscribed at the rate similar to the rate at which shares were allotted to Luhariwala Group which further reinforces the inherent strength in the valuations of the company as represented by the value of equity shares. We thus see no valid reason whatsoever in upholding the adverse conclusion drawn by the Revenue Authorities. - Decided in favour of assessee
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