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2019 (7) TMI 920 - AT - Income TaxAddition of share premium u/s addition 56(2)(viib) r.w. Rule 11UA - Income from other sources - excess amount received by the assessee over and above the FMV of preference shares - HELD THAT:- As gone through the provisions of section 56(2)(viib) and it dosen’t make any distinction between equity shares and preference shares and therefore, the first contention of the AR cannot be accepted. Regarding the valuation of the preference shares, the valuation should be determined as per Rule 11UA(1)(c) which requires the assessee to obtain a report from a merchant banker or a Chartered Accountant to determine the price which preference shares will fetch if sold in the open market on the valuation date. Revenue has not disputed the adoption of the NAV method by the assessee. Therefore, once the NAV method has been accepted, what has to be determined is the valuation of the preference shares based on net asset value as on the date of issue of such preference shares. The valuation date thus has to be the date of issuance of preference shares and not as per the last balance sheet date as has been adopted currently. The net asset value is determined by applying the formula where difference between the total assets and total liabilities as on the date of issuance of shares is divided by total amount of paid up capital of the company and multiplied by paid up value of new shares. In the instant case, given that there are existing equity and preference share capital, paid capital in respect of both of these category of shares shall be considered for determining total paid up capital of the company. In the result, we set-aside the matter to the file of the AO who shall determine the value of the preference shares as per the NAV method based on formula discussed above and such valuation has to be determined as on the date of issuance of such preference shares. Rate of depreciation - SLM or WDV - housing colony for accommodation of staff involved in the power project - HELD THAT:- The rates of depreciation on all such assets of the undertaking engaged in the power projects thus have to be computed on SLM basis and the assessee cannot pick and choose certain assets and claim depreciation on SLM and on other assets, claim depreciation on WDV basis. The housing colony is very much part of the business assets of the undertaking involved in the power projects and thus, depreciation thereon has to be computed on SLM Basis. As far as rate of depreciation is concerned, the housing colony will fall in the residuary category (vi)- others under clause (d) – Buildings and civil engineering works of permanent nature and the rate of depreciation which has been prescribed is 3.02%. In light of the same, the AO is directed to compute the depreciation on housing colony at the rate of 3.02% on SLM Basis. In the result, the ground of appeal no. 4 is dismissed and ground no. 5 is allowed.
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