TMI Blog2019 (10) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... e, we find the assessee had obtained permission of the competent authority for change of land use from agricultural to institutional for art, culture and convention centre for a total area of 42949 sq. mtrs or 51366.94 sq. yards. A perusal of the circle rate for such institutional area shows that the circle rate has been prescribed at ₹ 22,000/- per sq. yard. Thus, as per the circle rate prescribed by the competent authority, the value of total assets i.e., the fair market value of the land which was converted from agricultural into institutional comes to ₹ 113,00,72,749/-. If the other assets of ₹ 9,17,608/- is added to such asset and the total liability of 46,55,69,537/- is deducted, then, the net asset comes to ₹ 665,420,820/-. If the same is divided by the number of equity shares of 10,10,000/-, then, the value per share comes to ₹ 658.83 which is more than the premium of ₹ 5/- charged by the assessee on a share of ₹ 10/-. We, therefore, find merit in the argument of assessee that the valuation of the shares should be made on the basis of various factors and not merely on the basis of financials and the substantiation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are paid as premium 3. He noticed that the assessee company has received premium on issue of shares to the tune of ₹ 3.5 crores. He, therefore, asked the assessee to justify the premium received over and above the fair market value of the shares, with documentary evidence in terms of section 56(2)(viib) of the IT Act. On the basis of various details filed in the balance sheet, the Assessing Officer determined the paid up value of equity shares of ₹ 10/- each at ₹ 6.65 crores which is as under:- Total assets Total Liability/Total paid up value of the share 47,57,29,526 40,85,69,537/1,01,00,000 = 6.65 Total paid up value of equity shares of ₹ 10/- comes to ₹ 6.65. 4. He, therefore, asked the assessee to explain as to why the excess amount of premium over and above the value of the value per share should not be disallowed and added back to its income. In absence of any reply from the side of the assessee to justify such premium and considering the fact that it is a time barring case where the proceedings are going to be barred by time limitation, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deducted from the total liabilities. Share application money is not paid up capital, it is a liability till the time the shares are not allotted. PE = ₹ 1,01,00,000 PV = ₹ 10/- per share Fair Market Value = (A-L)/PE*PV = ₹ 10.05 FMV = 47,57,29,526 - (40,83,58,301 + 11,236 + 5,70,00,000) x 10 /1,01,00,000 = ₹ 10.05 Thus, the correct FMV per share, in this case comes to ₹ 10.05/-. 6.9 I have also considered the submission of the appellant with regard to the fact that the company has received permission of change in 'land use' of their land holding, thus having a commercial right for setting up an Institution for Art, Culture and Convention. However, the appellant has not at all explained how the same would increase the fair value of the shares of the company and/or the quantum of such right on the value of the equity shares. Further, according to the certificate of the changes of land use permission, received from Directorate of Town Country Planning, Haryana, the company has already paid some amount for such conversion in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of shares as per section 56(2)(viib). Ground No. 5 That the assessee craves its plea to add any other ground that may arise during the time of appeal proceeding. PRAYER Under the circumstances submitted above it is respectfully prayed that the appeal may kindly be allowed. Petition under Rule 46 (A) of the Income Tax Rules, 1968-Admittance of additional evidences since, few of the documents could not be filed because of various reasons like lack of clarity of documents of the assessee as well as authorized representative. 7. The ld. counsel for the assessee, referring to page 14 of the paper book, drew the attention of the Bench to the asset side of the balance sheet and submitted that the tangible assets shown in the balance sheet are to the tune of ₹ 56,44,80,642/-. Referring to page 19 of the paper book, he submitted that the land at Gurgaon has been shown at ₹ 56,45,80,642/- as at 31st March, 2014. Referring to page 25 of the paper book, he submitted that the Director of Town Country Planning, Haryana, vide letter dated 12th October, 2011 had granted c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been held that substantiation of the fair market value of the shares has to be first decided on the basis of the valuation done by the assessee and it cannot be decided from the lens of section 11UA which can be applied in case sub-clause (i) has been exercised. It has been held that FMV can be determined in either of the two manners whichever is higher so as to demonstrate that the value of shares does not exceed the fair market value and then the Assessing Officer cannot insist upon to follow only one particular method. He also relied on the decision of the Jaipur Bench of the Tribunal in the case of Sahu Minerals and Properties Ltd. in ITA No.895/JP/2017, order dated 07.01.2019. 9. The ld. DR, on the other hand, heavily relied on the orders of the Assessing Officer and CIT(A). 10. We have considered the rival arguments made by both the sides, perused the orders of the authorities below and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee, in the instant case, has allotted 70 lac equity shares of ₹ 10 each at a premium of ₹ 5 per share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the competent authority for change of land use from agricultural to institutional for art, culture and convention centre for a total area of 42949 sq. mtrs or 51366.94 sq. yards. A perusal of the circle rate for such institutional area shows that the circle rate has been prescribed at ₹ 22,000/- per sq. yard. Thus, as per the circle rate prescribed by the competent authority, the value of total assets i.e., the fair market value of the land which was converted from agricultural into institutional comes to ₹ 113,00,72,749/-. If the other assets of ₹ 9,17,608/- is added to such asset and the total liability of 46,55,69,537/- is deducted, then, the net asset comes to ₹ 665,420,820/-. If the same is divided by the number of equity shares of 10,10,000/-, then, the value per share comes to ₹ 658.83 which is more than the premium of ₹ 5/- charged by the assessee on a share of ₹ 10/-. We, therefore, find merit in the argument of the ld. counsel for the assessee that the valuation of the shares should be made on the basis of various factors and not merely on the basis of financials and the substantiation of the fair market value on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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