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2021 (9) TMI 1091 - AT - Income TaxAddition u/s. 56(2)(viib) in respect of share premium - value the shares on the basis of intrinsic value per share or by adopting Discounted Cash Flow Method (DCF) - AO expressed dissatisfaction over the valuation on the plea that the assessee was having negative reserves & surplus - The actual financial results of financial years 2014-15 & 2015-16 were not in accordance with the projections made by the assessee - discounting factor of 15.16% was very high - HELD THAT:- The valuation made by the assessee has been arrived at on the basis of DCF method of valuation and therefore, disturbing the same, without any cogent reasons, could not be held to be justified. The prime object of insertion of Sec. 56(2)(viib) was to tax excessive share premium received unjustifiably by private companies on issue of shares without carrying underlying value. The intent of the provision was to deter the generation and use of unaccounted money. However, there are no such allegations against the assessee since the assessee has demonstrated the fulfilment of primary ingredients of Section 68. Our aforesaid findings are duly supported by the binding judicial pronouncement of Hon’ble Bombay High Court in the case of Vodafone M-Pesa Ltd. V/s PCIT[2018 (3) TMI 530 - BOMBAY HIGH COURT] wherein it was held that there was no immunity from scrutiny of the valuation report and AO was entitled to scrutinise the valuation report and determine a fresh valuation either by himself or by calling for a final determination from an independent valuer to confront the petitioner. However, the basis has to be the DCF Method and it is not open to him to change the method of valuation which has been opted for by the Assessee. Here is a case where the shares had been subscribed by unrelated independent parties, who were one of the leading industrialists and businessman of the country, and after considering the valuation report and future prospect of the company, had chosen to make investment as an equity partners in a 'start-up company' like assessee, then it cannot said that there is any kind of tax abuse tactics or laundering of any unaccounted money. It cannot be the unaccounted or black money of investors as it is their tax paid money invested, duly disclosed and confirmed by them; and nothing has been brought on record that it is unaccounted money of assessee company routed through circuitous channel or any other dubious manner through these accredited investors. As the facts and circumstances of the case do not convince us to confirm the impugned additions made u/s 56(2)(viib). By deleting the same, we allow the ground no.1
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