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2022 (1) TMI 937 - AT - Income TaxDisallowance on account of business expenses and unabsorbed depreciation - HELD THAT:- This issue is squarely covered in favour of the assessee by the decision of the coordinate bench in assessee’s own case for assessment year 2012 – 13 [2019 (3) TMI 1951 - ITAT MUMBAI] The learned assessing officer has also made the addition for this impugned assessment year based on his order for assessment year 2012 – 13. In view of this ground number 1 and two of the appeal of the learned assessing officer are dismissed. Addition u/s 56 (2) (viib) - issue of shares that exceeds the face value - Assessee has issued share capital at ₹ 75 per share being face value of ₹ 10/- each at a premium of ₹ 65/- per share - HELD THAT:- For the purpose of determining ‘fair market value’ of unquoted shares provisions of rule 11 UA (2) applies which gives an option to the assessee to either value the shares as per prescribed formula given in clause (a) or clause (b) which provides for the determination of the fair market value based on discounted cash flow method as valued by a merchant banker or a chartered accountant (till 24th of May 2018). In the present case the assessee has valued the shares according to one of the ‘options’ available to assessee by adopting discounted cash flow method. Therefore, such an option given to the assessee cannot be withdrawn or taken away by the learned assessing officer by adopting different method of valuation i.e. net asset value method. The method of valuation is always the option of the assessee. AO is authorised to examine whether assessee has adopted one of the available options properly or not. In the present case, the learned assessing officer has thrust upon the assessee, net asset value method rejecting discounted cash flow method for only reason that there is a deviation in the actual figures from the projected figures. It is an established fact that discounted cash flow method is always based on future projections adopting certain parameters such as expected generation of cash flow, the discounted rate of return and cost of capital. In hindsight, on availability of the actual figures, if the future projections are not met, it cannot be said that the projections were wrong. To prove that the projections were unreliable, the learned assessing officer must examine how the valuation has been done. In a case future cash flow projections do not meet the actual figures, rejection of discounted cash flow method is not proper. Reason given by the learned assessing officer that the net asset value method and the discounted cash flow method for valuation of the shares of the company gives a wide variation between them, we do not find any reason to find fault with the assessee in such cases. Both these methods have different approaches and methodologies therefore there are bound to be differences, but it does not give any authority to the learned assessing officer to pick and choose one of the method and make the addition. It is the assessee who has to exercise one of the options available under the provisions of the law for valuing the shares. The learned assessing officer needs to examine that method. Naturally, if the discounted cash flow method and net asset value method gives the same result, where would have been the need to prescribe the two methods in the law. In view of above facts, we do not find any infirmity in the order of the learned CIT – An in deleting the addition made by the learned assessing officer u/s 56 (2) (viib) of the act. Accordingly, ground number 3 and 4 of the appeal of the learned assessing officer are dismissed.
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