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2019 (11) TMI 1355 - AT - Income TaxAddition u/s 56(2)(viia) - valuation of purchasing the shares of foreign company from its directors - HELD THAT:- In view of the fact that the Rule specifically provides that balance sheet as on the date of valuation i.e 11.2.2015 should be considered for valuation. Rule 11 U defines valuation data as the date on which the property or consideration, as the case may be, is received by the assessee. Since the shares were acquired by the assessee company on 11.2.2015 (being the valuation date) the valuation arrived at by the ld AO relying on financial statements as on 31.12.2014 deserves to be ignored and disregarded as not being in consonance with the Rule. Provisions of section 56(2)(viia) cannot apply to a foreign company as the relevant Rule 11U which defines ‘balance sheet’ was not applicable to a foreign company. We find that the amendment in this regard was brought in Rule 11U with effect from 1.4.19 under Rule 11U(b)(ii) of the Rules. This amendment is only prospective in nature and cannot apply to the year under appeal. No method was prescribed earlier for valuation of shares of a foreign company i.e KNP Industries Pte Ltd prior to Asst Year 2019-20, which mischief was sought to be rectified by way of an amendment made in the rules under Rule 11U(b)(ii) of the Rules w.e.f. 1.4.19 having prospective applicability. As we have already held supra that the legislature had sought to rectify the mischief hitherto prevailing upto Asst Year 2018-19 in the statute / rule and had accordingly brought an amendment effective from Asst Year 2019-20 onwards to curb the loophole available in the Act / Rules, hence we hold that the pre-amended definition of balance sheet cannot include foreign company therein. DR later filed the comments dated 26.6.2019 received from the AO before the bench. We have gone through the same and we find that the same is nothing but reiteration of the findings already recorded in the assessment order which had already been dealt by us hereinabove. DR that the issue needs to be remanded back to the file of ld CITA for fresh adjudication to decide in the light of pre-amended rule, as it would tantamount to giving a premium to the revenue to improve its case , which cannot be entertained by us, as the tribunal exercises only appellate jurisdiction. We direct the ld AO to delete the addition made u/s 56(2)(viia) of the Act. Accordingly, the grounds raised by the assessee are allowed.
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