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2023 (10) TMI 398 - AT - Income TaxAddition u/s 56(2)(viib) - AO rejected the valuation made by the valuer under DCF method and valued the share at Rs. 196 per share being book value of shares and thus made the addition of differential amount - CIT(A) limiting the investment to only the investment which yield dividend income AND allowing the interest expenses by observing that the assessee has its own fund HELD THAT:- We note that in this case, ld. CIT (A) has given a finding that actual performance of the assessee is even better than the forecast. Hence, any adverse inference on account of forecast is not appropriate and sustainable. Further, we note that ld. CIT (A) has passed a very reasonable and elaborate order. As decided in M/S. KILITCH HEALTHCARE INDIA LTD. AND (VICE-VERSA) [2022 (4) TMI 323 - ITAT MUMBAI] Rule 11UA(1)(C)(c) which is the relevant here, provides that the fair market value of unquoted shares and securities other than equity shares in a company which are not listed in any recognized stock exchange shall be estimated to be price it would fetch if sold in the open market on the valuation date and the assessee may obtain a report from a merchant banker or an accountant in respect of which such valuation. Admittedly, this rule is applicable in the present case and as provided in the said rule the assessee had option to obtain fair market value on the basis of valuation done by the accountant. Now the assessee has obtained valuation of accountant. Section 56(2)(vii)(b) provides fair market value of shares to be the one as may be determined in accordance with the method as may be prescribed or as may be substantiated to the satisfaction of Assessing Officer. Hence, if the method adopted by the assessee is not in accordance with the Rules contained in Explanation (a)(i) to section 56(2)(vii)(b), above any other method to the satisfaction of the AO can be adopted. The obvious corollary is that if the method adopted by the assessee is in accordance with the method contained in the Act read with Rules, the AO cannot disregard the same without cogent reasoning. Admittedly in this case the assessee has adopted a method which is in accordance with that prescribed in the Act read with the Rules. Prescribed method for unquoted shares is not any specific method but it provides that assessee may obtain valuation report from merchant banker or accountant. In this case the assessee has obtained valuation report of the accountant. To this extent, valuation adopted by the assessee cannot be said to be not in accordance with law - Decided against revenue.
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