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2018 (3) TMI 530

f the fair market value of the shares issued at a premium by the petitioners to its holding Company would be an issue which would be subject matter of consideration in the appeal and would be appropriately dealt with by him in appeal. - It is the petitioner's contention that the assessment order is without jurisdiction as it has ignored the DCF Method to arrive at fair market value of its shares, it would be open to the petitioners to file an application for stay of the order dated 21st December, 2017 passed by the Assessing Officer to the CIT (A) in its pending Appeal. In the above circumstances, there would be a stay of the order dated 21st December, 2017 to the extent of the demand raised for a period of 4 weeks from today. In case, .....

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iled an Appeal on 23rd January, 2018 to the CIT (A). On 25th January, 2018 the petitioner filed an application to the Assessing Officer under Section 220(6) of the Act seeking stay of the complete demand raised by assessment order dated 21st December, 2017. By an order dated 29th January, 2018 the Assessing Officer rejected the petitioner's application for complete stay of the demand under Section 220(6) of the Act till the disposal of the Appeal by the CIT (A) and directed the petitioners to pay 20% of the demand and approach him later for deciding the schedule for payment of the balance demand. 4. Being aggrieved by the order dated 29th January, 2018, the petitioners approached this Court by way of a Writ Petition No. 389 of 2018. Thi .....

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hares which had been issued at a premium to its holding Company for purposes of Section 56(2)(viib) of the Act. This for the reason that the Assessing Officer had for purposes of determining the fair market value of the shares issued to its holding Company substituted the Discounted Cash Flow (DLF) method by the Net Asset Value (NAV) method. This was contrary to Rule. 11UA of the Income Tax Rules, 1902 (Rules) as it provides an option to the Assessee to arrive at a fair market value of the shares either by the method as prescribed in Rule 11UA(2)(a) of the Rules i.e. NAV Method or in terms of Rule 11(2)(b) of the Rules i.e. DCF Method. 6. In exercise of the above option, the petitioners had provided a valuation report dated 11th March, 2015 .....

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see. The DCF Method is worked out on the basis of the projected figures of sales. These figures of sales, atleast for three years i.e. Assessment Years 2015-16, 2016-17 and 2017-18 were found infact inflated at the time when he was passing the Assessment order. Although, he does concede that at the time the Valuation Report dated 11th March, 2015 was prepared, except for some idea in respect of Assessment Year 2015-16, the sales of the other years were as on the basis of estimate. Therefore, at the time the Assessment order was passed on 21st December, 2017, the actual sales for three years appeared to be much lower than the projected sales. This inflation of projected sales had resulted in enhancing the fair market value of the shares by t .....

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e done/adopted at the Assessee's option. Nevertheless, he does not deal with the change in the method of valuation by the Assessing Officer which has resulted in the demand. There is certainly no immunity from scrutiny of the valuation report submitted by the Assessee. Therefore, the Assessing Officer is undoubtedly entitled to scrutinise the valuation report and determine a fresh valuation either by himself or by calling for a final determination from an independent valuer to confront the petitioner. However, the basis has to be the DCF Method and it is not open to him to change the method of valuation which has been opted for by the Assessee. If Mr. Mohanty is correct in his submission that a part of demand arising out of the assessme .....

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