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2024 (2) TMI 538 - AT - Income TaxAddition on account of share premium received on the contours of Section 56(2)(viib) - Premium has been charged to existing shareholder - Related parties / subscriber having pre-existing right in the company - AO rejected the DCF Method adopted by the assessee and adopted Net Asset Liability Method described in Rule 11UA of the Income Tax Rules, 1962 to ascertain the value of shares and thereby concluded that no premium of shares allotted is justified - CIT(A) found merit in the plea of the assessee that the provisions of Section 56(2)(viib) cannot be justifiably invoked HELD THAT:- The issue is no longer res-integra. The effect of issue of shares to holding company at a premium has been examined in the case of BLP Vayu (Projects-I) Pvt. Ltd. . [2023 (6) TMI 209 - ITAT DELHI] wherein as essentially observed that where the allotment has been made to existing shareholders, the deeming provisions of Section 56(2)(viib) would not ordinarily be applicable. This apart, in the instant case, the assessee has also supported the premium determined on issue of shares by DCF Method. Thus, the premium charged is supportable by the valuation report and the premium has been charged to existing shareholder. Thus effectively, the benefit if any arising to the company in turn benefits to the subscriber having pre-existing right in the company. While applying Section 56(2)(viib), the purpose for which deeming provision has been inserted is not achieved in the instant case. Hence, in our view, the conclusion drawn by the CIT(A) cannot be faulted either on facts or in law. Appeal of the Revenue is dismissed.
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