TMI Blog2019 (4) TMI 1646X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 U UA for determination the market value on the date of allotment of shares. In such a situation, it would implausible to hold that the Valuation report of the independent Valuer is not correct, since method adopted by him is not in accordance with 11UA. Once the computation mechanism as per new prescribed method was not available at the time of issuance of shares, then it is unfathomable to apply such method so as to reject the assessee s valuation and assessee cannot be expected to comply with the method when it was notified subsequent to the date of allotment of the shares. Accordingly, we hold that it would not be fair to make any kind of enhancement or addition simply based on provision of section 11UA. One of the cardinal principles of interpretation of fiscal statute is that they should be strictly construed and so long as the provision is free from any ambiguity, there should be no need to draw any analogy. A deeming provision on the other hand is intended to enlarge the meaning of a particular word which includes matters which otherwise may or may not fall within the normal provision, therefore, it should be extended to the consequences and incidents which has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of shares of ₹ 10 - HELD THAT:- Ld. CIT (A) in this year also has held that value of the shares based on NAV method has not been prescribed method under 11UA. As held above, the said rule will apply only if option is exercised in sub-clause (i), but if the assessee has been able to substantiate the fair market value in terms of sub-clause (ii), then valuation done by the assessee cannot be rejected simply on the ground that it does not stand the test of method provided in 11U and 11UA. Here the assessee has been able to show that the aggregate consideration received and the shares which were issued does not exceed FMV and has demonstrated the value as contemplated in Explanation (a) and therefore, the working of the assessee as per Explanation (a) sub clause (ii) has to be accepted. Section 56(2)(viib) provides for fair market value to be opted whichever is higher either under sub-clause (i) or sub-clause (ii). Since the working of FMV so substantiated by assessee company as per sub-clause (ii) is higher than value prescribed u/s 11UA, then same should be adopted for the purpose of valuation of the shares of the assessee company. - Decided in favour of assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the impugned assessment order. The relevant valuation report as noted in the assessment order is reproduced hereunder: - Book Value Market Value Trade Receivable 160.000 160,000 Cash Bank Balance 103.114 103,114 Share Application Money paid to Mail Today 167.500,035 167,500.035 Investment (Mail Today) 1.120,144.960 2,861.657,768 Assct (A) 1,287,908,109 3,029,420,917 TDS Payable 4.363.060 4.363.060 Other Current Liabilities 583.059 583.059 Provision for Int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 shares were actually allotted in the financial year pertaining to next assessment year, therefore, no addition can be made in terms of section 56(2)(viib) as same cannot be made in the year of the receipt of the funds but can only be made in the year when shares were issues or allotted. Enhancement by the CIT(A) 5. However, the Ld. CIT(A) had issued notice for enhancement which for the sake of ready reference is reproduced as under: - 8.3 The show cause notice issued to the appellant is as under: ... The appeal for the AY 2013-14 is pending before this office, wherein, you have filed grounds of appeal against the addition amounting to ₹ 11,42,86,626/-, made by the AO in terms of the provisions of Section 56(2)(viib) of the Act. 2. On perusal of the assessment order passed by the AO, the submissions and the documents placed by you on record before me during the appellate proceedings, it is noticed that the receipt and utilization of Share Application Money during the AY 2013-14 and 2014-15 is as under: AY 2013 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd not in the AY 2013-14 (in the year of receipt of money). However, the AO proceeded to make u/s 56(2)(viib) of the Act corresponding to SAM of ₹ 135.42 crores received during the AY 2013-14. Thereafter, the AO made addition corresponding to SAM of ₹ 135.42 crores in AY 2014-15 (in the year of issue of shares) as well. 5. The main issue involved in the case is that the addition u/s 56(2)(viib) should be made in the year of actual receipt of SAM or in the year of issue of shares. In this connection, it may be mentioned that the share application money is a liability recorded in the books of a company, which is likely to be returned if shares are not allotted whereas share premium is not a liability for the company rather it is a capital receipt to the company and company is not under any obligation to return it back. Moreover, the share applicant has a right to take its money back till it changes its character i.e. converted into share capital. But the investor cannot get bock the share premium. The only option available to the investor is to get the dividend from the company or gain/loss upon sale of this investment. 6. The section 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 2,62,12,00,047). The company has incurred losses of ₹ 29,68,96,659 during the year and also has net current liabilities of ₹ 6,54,29,827 as at March 31, 2013 consequent of which ability of the company to continue as a going concern is entirely dependent on financial and operational support from existing investor and successful implementation of business plan. These mitigating factors have been more fully disclosed in Note 2 of accompanying financial statements, in view of which the accompanying financial statements have been prepared under the going concern assumption, and consequently, no adjustment have been considered necessary to the carrying value of classification of balance sheet accounts. 9. The relevant portion of Note 2 is as under: During the current year, the company has incurred losses of ₹ 29,68,96,659 (Previous year 52,79,24,628) thereby resulting in accumulated losses of ₹ 3,20,39,42,192 against shareholders funds of ₹ 3,10,65,04,984, which has substantially eroded its net worth as on date. Management based on future business plans of the Company and potential infusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, therefore, while computing the FMV of the shares of M/s India Today Online Private - Limited as on 31.3.2012, the FMV of shares of M /s Mail Today Newspapers Private Limited at the most can be taken at face value i.e. ₹ 10 per share. Thus, the FMV of shares of M/s India Today Online Private Limited as on 31.3.2012 is worked out as under: Assets Value of shares in M/s Mail Today Newspapers @ 10 per share Rs.67,23,39,330 Other assets (as per balance sheet as on 31.3.2012) Rs.1,97,63,165 Total assets Rs.69,21,02,495 Liability Short term borrowings (as per balance sheet as on 31.3.2012) Rs.81,91,87,525 Trade Payable (as per balance sheet as on 31.3.2012) ₹ 1,50,000 Other current liabilities (as per balance sheet as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, the value of shares was also substantiated by the assessee based on various factors. Firstly, such valuation was supported by the past history, like assessee had sold its share holding in M/s. Mail Today Newspaper Pvt. Ltd. to M/s. TV Today Network Ltd. in assessment year 2011-12 to the extent of 19,63,502 shares at ₹ 43.29 per share on which assessee has offered the capital gain duly accepted by the revenue. Then same cannot be disputed in the impugned assessment year. Secondly, the AO of M/s. Mail Today has accepted the value of ₹ 43.29 while making the assessment u/s 143(3) and which later on in his order passed u/s 154 has been worked out at ₹ 40. Thus, once value of ₹ 40 has been accepted by the AO, then assessee who has valued the share at ₹ 30 in this year, then same cannot be held to be less than or more than fair market value. Lastly, it was also submitted that M/s. Mail Today Ltd has also issued the shares to non-resident third party at ₹ 43.29 and which was also informed to the RBI and was duly approved and accepted by the RBI. 7. However, Ld. CIT(A) has rejected the entire contentions raised by the assessee at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce placed by the assessee at two valuation reports dated 16.8.2012 and 27.12.2012, he held that clause (a) of Explanation section 56(2)(viib) provides for two methods for computation of the fair market value of the shares issued by the company, one which is provided in the rules, i.e., 11U 11UA and other one is residuary method which provides assistance to the assessee to substantiate the value to the satisfaction of the AO on the date of issue of shares. Here in this case no where assessee was able to substantiate the particulars of the shares of the company as on date of issue of shares and therefore assessee s case would not fall within the ambit of sub clause (ii) of clause (a) of the Explanation. The assessee has only discussed about value and valuation of the subsidiary of the assessee company and not the date of issuance of the shares. Thereafter, after quoting extensively the provision of section 11U and 11UA, he held that value of unquoted equity shares shall be the value based on the valuation which has been determined in the manner prescribed in clause (a) or clause (b) of rule 11UA, which provides for computation of value of shares based on book value in the balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected both the valuation report after detailed discussion and thereafter he proceeded to make his own valuation. Apart from that he also noted following facts: - It is an important aspect considering the fact that as on 31.3.2012, the book value of appellant s investment in M/s. Mail Today is 126,81,44,942/- as against its total assets of ₹ 128,79,08,107/-. Similarly, on 31.3.2013, the book value of appellant s investment in M/s Mail Today is 158,03,68,050/- as against its total assets of ₹ 169,49,95,674/-. The valuation reports submitted by the appellant at different points of time suggest that the value of shares of M/s India Today Online Private Limited is mainly being derived from the value of shares of M/s Mail Today News Paper Private Limited and therefore, financial statement and audit report of M/s Mail Today News Paper Pvt. Ltd. assumes importance in determination of fair market value of Shares. vi) Thereafter, Ld. CIT (A) noted certain observations made by the auditor in the audit report of Mail Today for the year ending 31st Marcy, 2013, which read as under: - We draw attention to Note 2 of the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e value of fair market value of Mail Today cannot be more than the face value i.e. ₹ 10. 9. Ld. CIT(A) further held that, since the date of valuation and the date of receipt of consideration which mainly falls in the financial year 2011-12, hence audited balance for Asstt. Year 2011-12 has to be considered and since such balance sheet was not submitted in the AGM of the shareholders which happen only on 25.9.2012, therefore, audited balance sheet for the financial year 2011-12 has to be considered for the purpose of computing the formula. Thereafter, he applied book value as per Rule 11UA and held that fair market value unquoted and quoted shares come to Rs. (-) 19,323/-; and therefore, once there is such a huge negative value then only the face value of ₹ 10 can be taken and ₹ 20/- which is premium has to be reduced in accordance with provision of section 56(2)(viib). Accordingly, he made enhancement of ₹ 20 per share for 2,40,83,333 equity shares allotted during the year. 10. Ld. CIT(A) has also rejected the assessee s contention and reliance placed on the valuation done and accepted in the assessment orders for Mail Today N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative, thus, its shares cannot fetch ₹ 40 in the open market. In doing so, the learned AO failed to appreciate the fact that in the preceding AY 2013-14, value of ₹ 40 per share has been accepted by AO himself in assessment order. * The learned AO rejected the method of valuation of shares of assessee company under section 56(2))(viib) read with * Explanation a(ii) and applied valuation as per Rule 11UA. However , while applying Rule 11UA the earned AO failed to apply the complete formula and failed to took factor of ₹ 10, and if said factor would have been taken, he value of assessee's share would have been ₹ 70 (even going by the method so applied by learned AO) Cash Bank Balance 1.03,114 1,03,109 1,03,114 Share application money paid to Mail Today ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umber of 2,40,93,333 and if only the number of shares is corrected in the working so done by learned AO, then the value per share would work out at ₹ 83.19 per share, which is far in excess of the so worked out by assessee and as such, there would be no need of any addition under section 56(2)(viib) of the Act. 13. Ld. Counsel submitted that the intention of the Legislature to bring to section 56(2)(viib) was to curb the menace of unaccounted money and there is no allegation of unaccounted money in the present case, because share application money was invested by holding company to its subsidiary and the entire transaction is through bank. Therefore, at the threshold provision of section 56(2)(viib) would not be applicable on the facts of the assessee s case. In support he strongly relied upon the ITAT Chennai Bench in the case of Vaani Estates (P) Ltd. vs ITO 172 ITR 571. 14. Without prejudice the aforesaid submissions he submitted that the learned AO during the course of assessment proceedings for AY 2013-14 had accepted and was satisfied with the Net Asset Value method so applied by assessee company to value its shares as per Explanation (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at to nowhere indicates remotely that, the said issue was examined or mind was applied by learned AO. Thus, enhancement so made is without jurisdiction which is not permissible in law as has been held by Hon ble Apex Court in the case of CIT vs. Rai Bahadur Hardutroy Motilal Chamaria, reported in 66 ITR 443. 17. Further, on the issue of scope of enhancement he submitted that Ld. CIT(A) can only acquire jurisdiction for enhancement only when AO has examined the issue from point of view of its taxability and or applied his mind on any of the issue. If the issue has not been examined or touched by AO then enhancement is not permissible on such issue. In support, Ld. Counsel strongly relied upon the decision of Jurisdictional High Court in the case of CIT vs. Sardarilal Company wherein the Hon ble Delhi High Court has reiterated the principles laid down by the Hon ble Supreme Court in the case of CIT vs. Rai Bahadur Hardutroy Motilal Chamariya (supra). 18. He further submitted that the assessee company had received ₹ 72,25,00,000/- as share application money in AYs 2011-12 and 2012-13 vide board resolution dated 20.12.2010, whereas, shares were i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly issued in AY 2014-15. 18. Ld. Counsel, further submitted that in response to the show cause notice of enhancement assessee has substantiated the fair market value of the shares in a very detailed manner. In his written submission he has summarised the assessee s contention as under: - ( i) It is most respectfully submitted that the learned AO in the order of assessment for AY 2013-14 had not disputed the fact that Investment made by assessee company in M/s Mail Today's shares have correctly been made by assessee company at ₹ 40, fair market value, while valuing shares of assessee company in A Y 2013 - 14 and further, even the said fair market value of ₹ 40 has been accepted by the AO of M/s Mail Today in AY 2013-14 and AY 20]4-15, brief details of assessment history of M/s Mail Today is highlighted below (Pg 285 to 287 of the paper book): a. AO of M/s Mail Today has accepted the value of ₹ 43.29 while making assessments u/s 143(3) of the Income tax Act, 1961 (kindly see pages 208 to 213 of paper book); b. Subsequently, vide order passed under section 154 of the Act for AY 2013-14, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( iii) That further, the assessee company had valued the shares of M/s Mail Today @ ₹ 40 per share on the basis of valuation of shares as per report provided by M/s Mail Today as on 20.07.2012, wherein, the valuer applied Discounted Cash Flow Method in order to value the shares of M/s Mail Today at ₹ 40 per share, and the said report has also been accepted by Revenue in the case of M/s Mail Today. That further, even the learned AO in AY 2013-14 has accepted the same. However, in AY 2014 -15, the learned AO has disputed the said valuation on the basis of financial losses in M/s Mail Today and also on statement of valuer of M/s TV Today Network Ltd., which has got the valuation of shares done of M/s Mail Today for its own purposes. ( iv) Now, here it is submitted that the valuation of shares of M/s Mail Today has been done on Discounted Cash Flow Method , whereas, the learned AO in AY 2014-15 has merely gone by the financial statements and has held that since, the company is running into losses, it cannot command ₹ 40 per share in the open market. In this regard, it is submitted that valuation of share is not only dependent on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e inference can be drawn on the basis of said statement or in alternative, if your goodself wants to rely on the said statement, then the statement may be provided for rebuttal and the assessee - appellant would also like to cross - examine the said valuer. vii) That the learned CIT (A) in the impugned order has arbitrarily brushed aside the aforesaid submissions so made by assessee company and had proceeded to invoke Rule 11U and 11UA of the Income Tax Rule, which was never made part of discussion by learned AO in the order of assessment nor even by learned CIT (A) in the show cause notice of enhancement dated 13.09.2018. Rather, the learned CIT (A) accepted the method of valuation of assessee company in the show cause notice dated 13.09.2018, however, only tinkered with the value of shares of M/s Mail Today to ₹ 10 as against ₹ 40 taken by the assessee company (which was duly explained to CIT(A) as above). Thus, it is most humbly submitted that the order so passed by learned CIT (A) is vitiated in law as the same is without following the principles of natural justice, reliance is placed on the following judgments: ( i) Hind Sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tements of Mail Today and has held that, since the company is running into losses, it cannot command ₹ 40 per share in the open market. In this regard, he submitted that valuation of share is not merely dependent on the financials, rather the Valuation report submitted by the assessee for valuing the shares of M/s Mail Today has taken a holistic view and has valued its shares at ₹ 40 after taking factors like, the forecasted revenue growth for a period of 5 years, forecasted free cash flows for a period of 5 years, discount rate, terminal growth rate and terminal value. Thus, rejection of valuation report of M/s Mail Today merely on the basis of losses in financial statements of Mail Today is not correct unless and until specific discrepancies could have been pointed in the valuation report so furnished through an independent department valuation officer. Apart there from, learned AO in his order for AY 2014-15 and CIT (A) have also mentioned about the valuation report of Mail Today Newspapers Pvt. Ltd. prepared by M/s Joy Financial Consulting Pvt. Ltd. for M/s TV Today Network Ltd., who was examined by AO of the assessee in AY 2014-15. In fact, in doing so, the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation (a) (ii) to section 56(2)(viib) provides a specific right to assessee company to value its shares and substantiate the same before the assessing officer, thus, the method so adopted by the valuer of assessee company was as per the aforesaid clause and only the higher value as worked out in Explanation (a) (i) or (ii) can be adopted. Thus, the working of assessee which was as per Explanation (a) (ii) to section 56(2)(viib) should have been adopted as it is high as compared to sub-clause (i); and reliance placed by learned CIT (A) solely on the working as per Explanation (a)(i) to section 56(2)(viib) is legally untenable and needs to be rejected. Further, the learned CIT (A) at pages 86 to 89 of his order has applied Rule 11UA(2)(a), i.e., the book value method and has worked out a negative figure of Rs (-) 89,336 per share being the value per share of assessee company. That while doing so, the learned CIT (A) has failed to appreciate that section 56(2)(viib) provides for fair market value, as to higher of calculations made in a (i) and a (ii) and as such, since the working so substantiated by assessee company is as per Explanation a (ii) and is higher than the value w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en in the impugned order as well as material referred to before us. The sole issue involved here in this appeal is with regard to enhancement of income of ₹ 48,16,66,660/- by adopting the fair market value of the shares issued during the year at ₹ 10/- per share and thereby disallowing the premium of ₹ 20 paid on such shares aggregating to 2,40,83,333 shares during the year after invoking the provision of section 56(2)(viib). The facts have already been discussed above in detail, however for the purpose of our adjudication, in a succinct manner, relevant facts are reiterated. The assessee company has received sum of ₹ 72,25,00,000/- as a share application money in the assessment years 2011-12 and 2012-13. In lieu of such share application money received in earlier years, 2,40,83,333 shares were issued on 8th September, 2012 for a consideration of ₹ 72,25,00,000/- having a share premium of ₹ 48,16,66,660/- and face value of ₹ 2,40,83,330/-, that is, on face value of ₹ 10 and premium of ₹ 20 shares. One important fact which is to be kept in the mind that the value of shares of M/s India Today Online Private Limited, i.e., assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is received ( iii) The shares of assessee derive value entirely from its investment in M/s Mail Today News Paper Pvt. Ltd., therefore value of Mail Today has to be examined. ( iv) The valuation of shares of M/s. Mail Today News Paper Pvt. Ltd. @ ₹ 40 per share as determined in the case of Mail Today and as determine by the assessee cannot be accepted, as the said company is running into loses and the value of shares of M/s. Mail Today cannot be more than the face value of ₹ 10 per share. 25. First of all, we have to examine, whether the value of the shares allotted by the assessee during the year on the share application money received in the earlier years shown by the assessee at ₹ 30 has been substantiated by the assessee either at the time of receiving the share application money or at the time of issuance of the shares. From the perusal of the record and the findings given in the impugned orders, we find that here in this case the Ld. AO in the assessment order has not tinkered with the valuation of the shares shown by the assessee albeit has gone by the fact that the percentage of shares holding of asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir market value of the shares. Such excess value shall be deemed to be the income of the concerned company chargeable to tax under the head income from other sources for the relevant financial year. In other words, the aggregate consideration received for such shares as exceeds the FMV of the shares shall be the income of the issuer company. The clause (a) of Explanation to section 56(2) (viib) reads as under: - Explanation For the purposes of this clause ( a) The fair market value of the shares shall be the value- ( i) As may be determined in accordance with such method as may be prescribed; or ( ii) As may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature] whichever is higher. Thus, the fair market value of the shares can be determined, either in accordance with method prescribed w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or addition simply based on provision of section 11UA. 28. Be that it may be, here in this case the Ld. CIT(A) has heavily relied upon the fact that there were heavy losses in the Mail Today and valuer of M/s. TV Today Ltd. had mentioned in his project report that Mail Today s net worth was in negative and therefore, such a value of ₹ 40 or ₹ 30 cannot be justified for which Ld. CIT(A) has given a detailed working. In sum and substance, the reasoning given by the Ld. CIT(A) for rejection of valuation report so furnished by the assessee are as under: - ( i) That as per Explanation (a) (ii) to section 56(2)(viib) the fair market value of share needed to be substantiated on the date of issue of shares by assessee, which has not been done by assessee, hence same has to be rejected. ( ii) That the valuation of investment of assessee in Mail Today Newspapers Pvt. Ltd at a fair market value of ₹ 40 per share is not justified as the said company is running into constant financial losses. ( iii) That the reports so furnished by assessee are not as per the prescribed Rules 11U and 11UA and the reports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrect, simply because the value adopted for the shares as per 11UA is less. The report of the Valuer of the assessee company based on NAV method cannot be tested in terms of 11U/11UA on the ground that the Rules do not prescribe valuation as per Net Asset Value method. The substantiation of the fair market value of the assessee has to be first tested on the basis of the valuation done by the assessee and it cannot be tested from the lens of 11UA, which can be applied in case sub-clause (i) has been exercised. When option of subclause (i) has not been exercised, then Ld. CIT (A) cannot resort to apply the same and reject the substantiation provided in sub-clause (ii) that it is not in accordance with sub-clause (i). 30. Coming to the observation of the Ld. CIT (A) that, since book value of Mail Today was in loss, therefore, the fair market value of the shares cannot exceed to face value of ₹ 10. From the perusal of the impugned order as well as material placed on record, it is seen that the project report for analysing the net worth of Mail Today prepared by Shri Joy Kumar Jain was for M/s TV Today Network Ltd. He was examined by the AO during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be strictly construed and so long as the provision is free from any ambiguity, there should be no need to draw any analogy. A deeming provision on the other hand is intended to enlarge the meaning of a particular word which includes matters which otherwise may or may not fall within the normal provision, therefore, it should be extended to the consequences and incidents which has been intended by the Legislature for a definite purpose and should not be extended beyond the mandate of the statute. Thus, deeming provisions require to be construed strictly. Here in this case the assessee has followed one of the options provided under such deeming provision and when such an option has been exercised, then same cannot be discarded to impose other option. The assessee s option has been rejected by the Ld. CIT (A) on the ground it does not stand the test of one of option, which he deems fit. Not only that valuation method adopted by the assessee to value its underlying asset, that is, Mail Today shares has been rejected on the ground that DCF method applied is not correct. DCF method is a recognised method where future projections of various factors by applying hindsight view and it cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CF method or in the Valuation Report furnished by an independent Valuer of Mail Today. 33. Accordingly, in view of the reasoning given above, we do not find any justification for reducing the value of shares to ₹ 10 and disallowing premium ₹ 20, as assessee was able to substantiate that the shares issued at ₹ 30 per share was less than the FMV and consequently the enhancement made the Ld. CIT(A) for making the addition of ₹ 48,16,66,660/- u/s 56 (2)(viib) is set aside and the addition by him is deleted. 34. Since we have deleted the addition on merits, therefore, it would be purely academic exercise in deciding the issue of enhancement by the Ld. CIT(A), which has been vehemently argued before the Ld. Counsel before us. Thus, this issue is treated as academic and is kept open. 34. Now coming to the appeal for the assessment year 2014-15, we find that here in this year, the AO on the basis of Valuation report prepared by M/s. Joy Financial Consulting Pvt. Ltd. of Mail Today has made the addition on the ground that he has reported that there were huge financial losses in Mail Today and accordingly, he has taken t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2969 -1996 -2459 -601 - - From the above, it can be seen that the company Mail Today News Papers is constantly incurring heavy losses year to year and has no such worth and the value of share has been hypothetically increased to ₹ 52.15 per equity share by the assessee company. The value of each equity share of Mail Today News Papers is taken at par though the value of the share is below ₹ 10/- by rejecting the assessee's method of valuation of shares. Accordingly, the fair market value of assessee company i.e. M/s India Today Online Pvt. Ltd. is calculated as per the provision of Rule 11 UA of IT. Rules 1962: Asset - Liability / Amount of Share 1694995674 - 8235472 / 240933330 = 7.00 The net worth of each equity share of M/s India Today Online Pvt. Ltd. comes to ₹ 7/-. However, for the sake of natural justice, the value of each share is taken at par and the premium amounting to ₹ 101.58 crores received in excess of fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t same cannot be accepted as such, as he in his Valuation report for Valuation has reported value of Mail Today at ₹ 44.78 per share. Further, AO himself is not relying upon the projections under DCF method as stated by the same person and is simply going by the fact that Mail Today was into heavy losses and net worth was negative and hence the face value should be only ₹ 10 and premium of ₹ 20 is not justified. We have already held that price of ₹ 30 per share is justified. Thus, the same finding will apply mutatis mutandis for this year also. 37. Ld. CIT (A) in this year also has held that value of the shares based on NAV method has not been prescribed method under 11UA. As held above, the said rule will apply only if option is exercised in sub-clause (i), but if the assessee has been able to substantiate the fair market value in terms of sub-clause (ii), then valuation done by the assessee cannot be rejected simply on the ground that it does not stand the test of method provided in 11U and 11UA. Here the assessee has been able to show that the aggregate consideration received and the shares which were issued does not exceed FMV and has dem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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