TMI Blog2018 (10) TMI 1391X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at the FMV per share as on 22.06.2010 at ₹ 31.05/- as worked out by the assessee. Also he has rightly followed Rule 11U as applicable for the FY 2010-11 relevant to the AY 2011-12. To hold otherwise would be to exalt artifice above reality and to deprive the statutory provision in question of all serious purpose. - Decided against assessee. - ITA No. 3499/MUM/2016 - - - Dated:- 9-5-2018 - Shri Saktijit Dey (Judicial Member) And Shri N.K. Pradhan (Accountant Member) For the Assessee : Mr. S.C. Tiwari, AR For the Revenue : Ms. Pooja Swaroop, DR ORDER PER N.K. PRADHAN, AM This is an appeal filed by the assessee. The relevant assessment year is 2011-12. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-28, Mumbai [in short CIT(A) ]and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the Act ). 2. The grounds of appeal filed by the appellant/assessee read as under: 1) That on the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the addition of ₹ 31,50,000/- made by the Assessing Officer. 2) That on the facts and the circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person or persons on or after 01.10.2009, any shares and securities and the consideration for the same is less than the aggregate Fair Market Value (FMV) of these shares and securities by an amount of ₹ 50,000/-, the aggregate FMV of these shares and securities as exceeds such consideration is treated as income chargeable under the head income from other sources . Further, the AO held that a FMV of these shares and securities for the purpose of section 56 is to be determined as per Rule 11UA(1)(c) r.w. Rule 11U of the Income Tax Rules, 1962 (in short the Rule ). Therefore, the AO requested the assessee, during the course of assessment proceedings, to give the working of the FMV of 30,00,000 shares of GEPL received on 22.06.2010 and also explain the applicability/otherwise of section 56(2)(vii). In response to it, the assessee vide reply dated 20.03.2014 submitted before the AO a working for determining the FMV of these shares, as per which the value is ₹ 28.61/- per share. However, the AO noted that the FMV of these shares worked out to ₹ 28.61/- as on 31.03.2010, whereas as per Rule 11UA r.w. Rule 11U applicable for the year under consideration (prior to 29.11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Before us, the Ld. counsel of the appellant submits that the value of the shares arrived at is in consonance with the principle for determining the FMV as per section 56(2)(vii) r.w. Rule 11UA and Rule 11U and available previous audited balance sheet taken as the base. It is stated that the only bone of contention in the present case is the date, which is to be taken as the base for the date of valuation of shares i.e. the audited balance sheet of the immediate preceding year i.e. 31.03.2010 or the balance sheet of the succeeding year i.e. 31.03.2011 for the date of transaction i.e. 22.06.2010. It is stated that Ld. CIT(A) failed to appreciate the fact that the value of shares as on the date of transfer i.e. 22.06.2010 was not available as the balance sheet of the company as on June 2010 was not drawn; hence the base was taken to be the previous audited balance sheet as on 31.03.2010. As per the balance sheet as on 31.03.2010, the value of each share came to ₹ 28.6/- whereas the transaction was done on a higher rate of ₹ 30/- per share as mutually decided by the parties. The Ld. counsel submits that the AO has used a wrong method of valuation, taking the base of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Taxman 203 (Bom) which has been reproduced by the Ld. CIT(A) at para 5.3 of his order dated 22.04.2016. It is argued that none of the case laws relied on by the Ld. counsel of the appellant refer to the provisions of section 56(2)(vii)(c) of the Act. The Ld. DR further submits that the valuation of unquoted equity shares is to be based on a balance sheet as drawn up on the valuation date i.e. 22.06.2010. Nothing was preventing the appellant from drawing up the balance sheet of GEPL as on that date for this limited purpose. More so, in the light of the fact that the appellant and his wife were the only shareholders in GEPL. For the above reasons, the Ld. DR submits that the order of the Ld. CIT(A) confirming the addition of ₹ 31,50,000/- made by the AO u/s 56(2)(vii)(c) be upheld. 7. We have heard the rival submissions and perused the relevant materials on record. The reasons for decisions are given below. We begin with the decisions relied on by the Ld. counsel. In C.W.S. (India) Ltd. (supra), it is held that though literary construction might be the general rule in construing taxing enactments as contended by the assessee, it did not mean that it should be adop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fra. 7.1 To recapitulate the background facts, the appellant had lent ₹ 10.23 crores to BCPL to enable it to repay its outstanding loan of CBI. Then BCPL repaid ₹ 1.15 crores to the appellant. For the balance amount, BCPL transferred 30,00,000 shares of GEPL to the appellant at ₹ 30/- per share. The appellant and his wife are only shareholders in GEPL. The contentious issues are nicely summed up by the appellant in his written submission dated 21.03.2016 filed before the Ld. CIT(A) (Page 66 of P/B) and these are (i) whether the date of valuation should be as per the balance sheet available as on 31.03.2010 or the succeeding balance sheet, (ii) whether the definition of balance sheet in Rule 11U(b), which was amended in the statute book w.e.f. 29.11.2012 and would be binding on pending proceedings for AY 2011-12 and have retrospective effect. In respect of the first question we find that GEPL is a closely held company wherein the appellant and his wife are the only shareholders. In response to a query raised by the AO, the appellant filed before him a working of the FMV per share of GEPL as on 22.06.2010 which comes to ₹ 31.05/-. For this purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the intent of the maker thereof. 28. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. Our belief in the nature of the law is founded on the bedrock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips v. Eyre [1870] LR 6 QB 1, a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spectivity. In the instant case, the proviso added to Section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by out weighing factors. *** *** *** *** 35. We would also like to reproduce hereunder the following observations made by this Court in the case of Govinddas v. ITO [1978] 103 ITR 123, while holding Section 171 (6) of the Income- Tax Act to be prospective and inapplicable for any assessment year prior to 1st April, 1962, the date on which the Income Tax Act came into force: 11. Now it is a well settled rule of interpretation hallowed by time and sanctified by judicial decision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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