TMI Blog2019 (6) TMI 1174X X X X Extracts X X X X X X X X Extracts X X X X ..... warranted. That being so, we decline to interfere in the order passed by the Ld. CIT(A), his order on this issue, is hereby upheld and grounds raised by the revenue is dismissed. Addition of income from other sources u/s 56(2)(viib) - allotment of shares at a price which exceeds fair market value of the share and thus violated the provisions of section 56(2)(viib) - HELD THAT:- AO has observed that the assessee company has made allotment of 6,19,000 Equity Shares @ ₹ 42/- per share during the instant year at a price which exceeds fair market value of the share and thus the provisions of section 56(2)(viib) of the Act was violated. The fair market value on the basis of book value of company as on 31.03.2013 was calculated by ld. Assessing Officer at ₹ 25.55/- per share. Revaluation reserves need not be deducted while calculating the fair market value, as per rule 11UA(2) of the I.T. Rules. Considering all no infirmity in the order passed by the CIT(A) hence we dismiss the ground raised by the revenue. - IT(SS)A No.158/Kol/2017 - - - Dated:- 19-6-2019 - Shri S.S. Godara, JM And Dr. A.L. Saini, AM For the Assessee : Shri A.K. Singh, CIT D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, the Ld. CIT(A)-20 erred in upholding the value of shares as determined by the assessee at ₹ 42.40/- per share as against ₹ 25.5 per share determined by the A.O, discussing about intangible assets in form of goodwill, knowhow, patents, copyrights, trademark, license etc. to be taken into consideration referring the company being 29 years old and not examining the fact that such claim for valuation of share was not made by the assessee and thus, CIT(A) wrongly interpreted clause (iii) of Rule 11UA and allowed Revaluation Reserve of ₹ 22,78,35,159/- to be taken into account for determining the value of shares as per Rule 11UA while as per this clause, revaluation reserve being a reserve set apart towards depreciation should not have been taken into account. 6. That the department craves leave to add, alter or modify any grounds of appeal in the course of Appellate proceedings. 3. Ground nos. 1 and 2 relate to deletion of addition of ₹ 4,50,37,200/- u/s 14A read with Rule 8D. 4. Brief facts qua the issue are that the Assessing Officer made addition u/s 14A read with Rule 8D(2)(ii) at ₹ 4,20,67,584/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. At the outset itself, the ld. Counsel for the assessee submitted before us that ground nos. 1 and 2 raised by the Revenue are no longer res integra . The ld. Counsel defended the order of ld. CIT(A) which is reproduced below: I have considered finding of the A.O., in the assessment order and the written submission filed by the assessee on this issue. In the written submission it have been categorically stated that the assessee has not earned / received any dividend or exempted income from its investment in order to qualify u/s 14A read with Rule 8D. The AR has also brought it on record that investments have been made by the company in purchasing shares of its subsidiary company and other group companies. In the assessment order the A.O. has discussed order of the Hon ble Calcutta High Court in the case of CIT-III, Kolkata vs. RKBK Fiscal Services Pvt. Ltd. 358 ITR 288 (Cal). The AR has brought it on record that in the case of M/s RKBK Fiscal Services Ltd. case (supra), the company had earned dividend income but in the present case the assessee has not earned any dividend income. So, the ratio decided in the case of M/s RKBK Fiscal Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the income was earned and none other consequently the expenditure incurred in connection therewith should also be dealt with in the same previous year. Thus, by application of the matching concept, in a year where there is no exempt income, there cannot be a disallowance of expenditure in relation to such assumed income. The language of section 14A(1) should be read in that context and such that it advances the schemes of the Act rather than distort it. [Para15] In conclusion, the provisions of section 14A, read with Rule 8D of the Rules cannot be made applicable in a vacuum i.e. in the absence of exempt income. The question of law are answered in favour of the assessee and against the department and the appeal allowed. [Para 16] Since the assessee does not have any exempt income therefore no disallowance is warranted. That being so, we decline to interfere in the order passed by the Ld. CIT(A), his order on this issue, is hereby upheld and grounds raised by the revenue is dismissed. 9. Now we shall take ground nos. 3,4 and 5 raised by the assessee which relate to deletion of addition made on account of income from other sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see carried the matter in appeal before the Ld. CIT(A) who has deleted the addition observing the following: I have considered findings of the AO in the assessment order and the written submission filed by the AR on this issue. I think the main reason for disagreement regarding valuation/ determination of fair market value of shares is because of difference of opinion in respect to interpretation of rule 11UA of the I T Rules 1962 and sub-clause (ii) of section 56(2)(viib). This sub-section is reproduced as under: 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 . I think while calculating the fair market value, the AO has not taken into account the intangible assets being goodwill, know-how, patents, copy rights, trade marks, licences etc into consideration. The AR has brought it on record that this company is 29 years old compariy and it has its own reputa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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