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2020 (8) TMI 315 - AT - Income TaxIncome from other sources - Addition u/s.56(2)(viib) - basis of valuation of equity shares for issuing at a premium of ₹ 170/- against the face value of ₹ 10/- - following “net value method” as per Rule 11UA (2)(a) of the I.T.Rules, 1962 - As per AO market value of the shares was required to be determined as per Rule 11 UA(1)(c)(b) and not as per Rule 11UA(2) - HELD THAT:- As per Rule 11UA(1)(c)(b) of the Rules, it is the prerogative of the assessee to estimate the fair market value of the shares issued by it adopting one method out of two methods i.e. discounted cash flow method or book value method. The revenue authorities cannot force the assessee to adopt particular method for valuing the fair market value of the share especially when Rule 11UA(1)(c)(b) provides that it is the option of the assessee to chose any method either discounted or book value method for estimating the fair market value of the shares issued by it during the relevant financial period. In this case, the assessee has adopted the discounted free cash flow method as prescribed under Rule 11UA (2)((b) of the Act. Jaipur Bench of ITAT in the case of Safe Decore Pvt Ltd. [2018 (2) TMI 1274 - ITAT JAIPUR] has held that the assessee cannot be denied the benefit of discounted free cash flow method only because the consideration amount was received much before Rule 11UA(2) came into force, which is one of the method to be adopted by the assessee for valuing the fair market rate. The above decision has been followed by the ld CIT(A) in the impugned order in deleting the addition. In the present case shares have been issued by the assessee at ₹ 180/- per share as against the fair market value of ₹ 189/- determined as per discounted free cash flow method and, therefore, no addition is required to be made in the hands of the assessee u/s.56(2)(viib) - no infirmity in the impugned order of the ld CIT(A) to interfere. Accordingly, we uphold the findings of the ld CIT(A) and reject the ground of appeal of the revenue.
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