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2019 (10) TMI 191 - AT - Income TaxAddition u/s 56(2)(viib) - Excess amount of premium over and above the value of the value per share - assessee filed certain additional evidences and submitted that in view of Rule 11UA of the Income Tax rules, 1962, the value should be ₹ 66.50 per share instead of ₹ 6.50 per share computed by the AO - HELD THAT:- Assessee that the value of its shares in terms of clause (ii) of Explanation (a) of section 56(2)(viib) on the basis of the value of its land at market value which is ₹ 113 crores comes to ₹ 658.83 per share. Therefore, it is the submission of assessee that instead of taking the book value of the property at ₹ 47.81 crore as per the balance sheet, the lower authorities should have taken the fair market value of land which was converted from agricultural to institutional at ₹ 113,00,72,749/- and other assets of ₹ 9,17,608/-. Thus, according to him, the fair market value of the shares comes to ₹ 658.83 per share. From the various details furnished by the assessee, we find the assessee had obtained permission of the competent authority for change of land use from ‘agricultural’ to ‘institutional’ for art, culture and convention centre for a total area of 42949 sq. mtrs or 51366.94 sq. yards. A perusal of the circle rate for such institutional area shows that the circle rate has been prescribed at ₹ 22,000/- per sq. yard. Thus, as per the circle rate prescribed by the competent authority, the value of total assets i.e., the fair market value of the land which was converted from ‘agricultural’ into ‘institutional’ comes to ₹ 113,00,72,749/-. If the other assets of ₹ 9,17,608/- is added to such asset and the total liability of 46,55,69,537/- is deducted, then, the net asset comes to ₹ 665,420,820/-. If the same is divided by the number of equity shares of 10,10,000/-, then, the value per share comes to ₹ 658.83 which is more than the premium of ₹ 5/- charged by the assessee on a share of ₹ 10/-. We, therefore, find merit in the argument of assessee that the valuation of the shares should be made on the basis of various factors and not merely on the basis of financials and the substantiation of the fair market value on the basis of the valuation done by the assessee simply cannot be rejected where the assessee has demonstrated with evidence that the fair market value of the asset is much more than the value shown in the balance sheet. Grounds raised by the assessee are allowed.
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