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2022 (12) TMI 753 - AT - Income TaxAddition u/s 56(2) - method of valuation adopted by the assessee which is in conformity with the Rules specified under 11UA - determination of the valuation under DCF method - AO has rejected the valuation under DCF method solely on the ground that the actual performance did not match the projections - contention of the Ld. DR relying on the book value adopted by the Ld. AO cannot be accepted because as per section 56(2) of the Act, the assessee has option to use either the fair market value determined as per Net Asset Value or the value determined as per the DCF method - HELD THAT:- The determination of the valuation under DCF method was carried by the valuers on the basis of information or material available on the date of valuation and the projections of the revenue provided by the management. The methodology adopted by the assessee applying the DCF method is a recognized and accepted method. In our opinion the valuation under DCF method is intrinsically based on the projections and based on the potential value of the future business. These assumptions can undergo changes for a period of time. The Ld. DR also has not demonstrated that the methodology adopted by the assessee is not correct but simply the Ld. AO rejected the valuation as it does not match with the actual results. Various Courts have held that the valuation of shares is not an exact science and therefore has to be done with some basic presumptions prevailing on the date of valuation. As decided in Cinestaan Entertainment (P) Ltd [2021 (3) TMI 239 - DELHI HIGH COURT] Assessee had adopted DCF method to value its shares and the Revenue is unable to demonstrate that the methodology adopted by the assessee is not correct; AO has simply rejected the valuation of the assessee on the ground that performance did not match projections and failed to provide any alternate fair value of shares; Tribunal was therefore justified in deleting the addition made U/s. 56(2)(viib). Judicially following the above legal precedent, we are inclined to uphold the order of the Ld. CIT (A) and dismiss the appeal of the Revenue.
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