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2023 (8) TMI 763 - AT - Income TaxAddition u/s 56(2)(vii) - calculation adopted by the assessee for calculating the fair market value be disallowed - DCF method - partner of the valuer firm has not provided any logical submission in respect of calculation of fair value of shares and on subsequent dates, none represented the valuer firm - Assessee argued share premium has been valued by an approved valuer, as per the relevant provisions of the Act, who valued the fair market value on DCF method, which is a recognized method and the AO/CITA has not pointed out any defect or error in the said method and has simply rejected the valuation report without any basis - HELD THAT:- There is no dispute that the assessee has supported its valuation by a valuer’s report as per the relevant provisions of the Act. It is also true that the lower authorities have not pointed out any error or infirmity or defect in the said valuation report. The said valuation report has been rejected only because there were differences between actuals and projection done by the valuer. As decided in INDIA TODAY ONLINE PVT. LTD. VERSUS ITO, WARD-12 (2) NEW DELHI [2019 (4) TMI 1646 - ITAT DELHI] DCF method is a recognised method where future projections of various factors by applying hindsight view and it cannot be matched with actual performance, and what Ld. CIT (A) is trying to do is to evaluate from the actual to show that the Company was running into losses, therefore, DCF is not correct. Valuation under DCF is not exact science and can never be done with arithmetic precision, hence the valuation by a Valuer has to be accepted unless, specific discrepancy in the figures and factors taken are found. Determination of value of shares on the basis of financial statement of a Company or the book value does not have much relevance under DCF method, because it is based upon, fair expected revenue growth and fair expected cash flow for a period of five years; discount rate and terminal growth rate; and terminal value, etc. are the factors which are taken in the consideration. Therefore, to reject the valuation mainly on the basis of losses shown in the financial statement would not be correct, until and unless some discrepancy has been out either in the DCF method or in the Valuation Report furnished by an independent Valuer. No merit in the addition made by the AO. The findings of the ld. CITA are set aside - Decided in favour of assessee.
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