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2018 (3) TMI 882

lue while valuing its shares? - FMV adoption - Held that:- While valuing the shares the book value of the assets and liabilities declared by the TEPL should be taken into consideration. There is no whisper under the provision of 11UA of the Rules to refer the fair market value of the land as taken by the Assessing Officer as applicable to the year under consideration. Therefore, we are of the view that the share price calculated by the assessee of TEPL for ₹ 5 per shares has been determined in accordance with the provision of Rule 11UA. Therefore, we have no hesitation in reversing the order of the lower authorities. Hence, the grounds of appeal of the assessee are allowed. - ITA No. 6964/Del/2017 - 7-3-2018 - SH. BHAVNESH SAINI, JUDI .....

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the above grounds are without prejudice to each other. 2. The interconnected issue raised by the assessee in all the grounds of appeal is that the ld. CIT(A) erred in confirming the order of the AO by sustaining the disallowances of ₹ 11,84,46,336/- on account of undervaluation of shares. 3. Briefly states facts of the case are that the assessee in the present case is a limited company and deriving its income under the head rental and interest income . The assessee during the year under consideration has acquired shares to the tune of 48% of M/s. Tuff Engineering Pvt. Ltd. (in short TEPL ) from certain companies as detailed under: Sl. No. Particulars Number of shares 1. Dhansafal Vyapar Ltd. 8076650 2. Saket International Pvt. Ltd. 8, .....

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T(A) submitted that the fair market value of a closely held company should be computed on the basis of the book value of the assets as per rule 11UA of Rules. 3.3 As per the book value of the assets held by the TEPL, the value per share is coming out @ ₹ 4.96 per shares whereas these shares were required by the assessee at ₹ 5 per shares which is more than the fair market value of the shares. 3.4 However, the learned CIT(A) disregarded the contention of the assessee and confirmed the order of the AO by observing that the fair market value of the land while valuing the shares should be adopted as per the provisions of Rule 11UA read with Section 56(2)(viib) of the Act. Being aggrieved by the order of the learned CIT(A), the asses .....

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ree companies as discussed in the preceding paragraphs. The assessee claimed to have valued the shares of TEPL as per the provisions of Rule 11UA of the Rules and filed a copy of the report prepared by the Chartered Accountants in support his claim to justify the price of shares at which these were acquired. However, the Assessing Officer was of the view that the assets declared by the TEPL in its balance sheet should have been valued as per the circle rate while determining the value of the shares acquired by the assessee. Accordingly, the Assessing Officer determined the value of the shares at ₹ 45.72 per shares of TEPL. Thus, the difference of ₹ 40.72 was treated as income from other sources of the assessee under the provisio .....

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ause shall not apply to any such property received by way of a transaction not regarded as transfer under clause (via) or clause (vic) or clause (vicb) or clause (vid) or clause (vii) ofsection 47. Explanation.-For the purposes of this clause, fair market value of a property, being shares of a company not being a company in which the public are substantially interested, shall have the meaning assigned to it in the Explanation to clause (vii);] 6.2 The fair market value as per the Explanation of Section 56(2)(vii) of the Act, reads as under: (b) fair market value of a property, other than an immovable property, means the value determined in accordance with the method as may be prescribed 6.3 Similarly, the provisions of 11UA of the Rules are .....

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w applicable thereto; (v) any amount representing provisions made for meeting liabilities, other than ascertained liabilities; (vi) any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares; PE = total amount of paid up equity share capital as shown in the balance-sheet; PV = the paid up value of such equity shares; 6.4 On the plain reading of above Rule, it is revealed that while valuing the shares the book value of the assets and liabilities declared by the TEPL should be taken into consideration. There is no whisper under the provision of 11UA of the Rules to refer the fair market value of the land as taken by the Assessing Officer as applicable to the year under con .....

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