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2021 (12) TMI 706 - AT - Income TaxRevision u/s 263 by CIT - Addition u/s 56(2) - assessee issued/allotted 560000 Equity shares at premium of ₹ 50/- each and as per CIT value of shares as per NAV method was ₹ 42.60/- as per CIT action of the AO in accepting the method of valuation contrary to Rule 11UA of the Rules was erroneous and prejudicial to the interest of the Revenue and Assessee did not give any valuation report as required under Rule 11UA of the Rule.- Whether AO called upon the assessee to show cause as to why the provisions of Sec.56(2)(viib) of the Act should not be applied? - HELD THAT:- It is no doubt true that as per explanation to section 56(2)(viib) of the Act apart from the determination of FMV of shares under Rule 11UA of the Rules, intrinsic value is also one of the methods prescribed method as per Sec.56(2)(viib) (a)(ii) of the Act, but the higher of the valuation as per Sec.56(2)(viib)(a) (i) or (ii) has to be considered by the AO before applying those provisions. The admitted position in the present case is that the assessee did not file any valuation report to substantiate the fair market value of shares issued in terms of Sec.56(2)(viib) (a)(i) of the Act and Rule 11UA of the Rules. In such circumstances, we are of the view that the AO could not have accepted the intrinsic value without calling for a value in terms of Rule 11UA of the Rules to find out whether class (i) or class (ii) of explanation (a) to Sec.56(2)(viib) of the Act would be applicable - Thus the order of the AO was erroneous. With regard to the argument that the money was received in the previous year relevant to Assessment Year 2014-15 and therefore the provisions of section 26(2)(viib) of the Act were not application to Assessment Year 2015-16, the admitted position is that the shares were issued in Assessment Year 2015-16 and this would be the appropriate year in which the applicability of provisions of section 56(2)(vii) of the Act should be considered. In this regard, we place reliance on the decision of M/S. Taaq Music Private Limited [2020 (10) TMI 28 - ITAT BANGALORE] in which the view as stated above was laid down by the Tribunal. We, therefore, find no merit in the appeal by the assessee.
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