TMI Blog2021 (3) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the considered opinion that the Lower Authorities were not justified in rejecting the valuation report as submitted by the assessee in this regard. Observation of the Ld. CIT (A) that the Chartered Accountant has relied on the data supplied by the assessee in this regard is irrelevant in as much as the Chartered Accountant has carried out the valuation in accordance with the prescribed method as per Rule-11UA of the Income Tax Rules, 1962 and, therefore, such valuation report, in absence of specific defects being pointed out, has a binding value. We note that neither the Ld. CIT (A) nor the Assessing officer have evaluated the valuation report in light of the relevant material but have only rejected the same on assumptions and presumptions and the same cannot be upheld - AO should examine the issue afresh after giving due opportunity to the assessee to present its case in this regard. Thus, this ground is allowed for statistical purposes. Disallowance of ROC fees paid by the assessee company - HELD THAT:- It is settled law that ROC fees paid are to be considered as preliminarily expenditure within the meaning of Section 35D of the Act. The same is directed accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated to fee paid to ROC for enhancement of Authorized Share Capital. 6. That the Ld. CIT (Appeals) has erred on facts and in law in relaying on irrelevant case laws and ignoring the relevant judicial pronouncements relied upon by the appellant. 7. That the Ld. CIT(Appeals) has erred on facts and in law in deciding the appeal of the appellant purely on probabilities without corroborating with relevant material and confirming the assessment which was also based upon assumptions only. 8. That the impugned appellate order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence. 9. That the Appellate craves leave to add/alter any/all grounds of appeal before or at the time of hearing of the Appeal. 3.0 The Ld. Authorized Representative (AR) submitted that during the year under consideration, Rockland Hospitals Limited had subscribed to 3,26,741 equity shares of the assessee company at the rate ₹ 10/- each (₹ 32,67,410/-) along with ₹ 33/- as share premium (₹ 1,07,82,453/-) for the purpose of running the ancillary services like in house diagnostic centre, laboratories etc. It was sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of society is very high i.e. ECHS/CGHS/Public sector companies. Being a company engaged in healthcare business having exceptional growth prospects in future and promoters being themselves of reputed health services provider, the estimates of future revenue were in line with the industry growth and prospects and accordingly, the application of the DCF method is the most appropriate method and is recognized in Rule 11UA of the Income Tax Rules, 1962 by the legislature itself. 3.5 The Ld. AR submitted that there are numerous judicial Precedents wherein the Tribunal has held that as per section 56(2)(viib) read with Rule 11UA of the Rules, every assessee has an option to do valuation of shares and determine fair market value either by DCF method or NAV method and that the assessing officer cannot examine or substitute his own value in place of value so determined. It was further argued that the Tribunal, in numerous decisions, had specifically rejected the contention of the Revenue to rely of comparison with actual revenues in future with estimated future revenue disclosed in the valuation report. Reliance was placed on the following orders passed by the Delhi Benches of the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital Limited to acquire shares of erstwhile shareholders in the month of November, 2014. Apparently, the Assessing Officer has proceeded on mere assumptions and surmises while disregarding the valuation report submitted by the assessee. The assessee has applied the DCF method for the purposes of valuation of shares and has relied on the valuation report of the Chartered Accountant in this regard. There is settled law on the issue that as per Sec. 56(2)(viib) of the Act read with Rule-11 UA of the Income tax Rules, 1962, every assessee has an option to do valuation of shares and determine its Fair Market Value either by DCF method or NAV method, and that the Assessing Officer cannot examine or substitute his own value in place of the value so determined. The ITAT Delhi Bench in the case of Cinestaan Entertainment (P.) Ltd. vs. ITO, reported in [2019] 106 taxmann.com 300 (Delhi Tribunal), has held as under: 32. Section 56 (2) (viib) is a deeming provision and one cannot expand the meaning of scope of any word while interpreting such deeming provision. If the statute provides that the valuation has to be done as per the prescribed method and if one of the prescribed methods has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtered Accountant/Valuer other than stating that year-wise results as projected are not matching with the actual results declared in the final accounts. Before the Id. CIT (A), reasons for variation between projected and actuals were duly explained. The Ld. CIT (A) has accepted such explanation but rejected the DCF valuation report as submitted by the assessee. Accordingly, in the absence of any defect in the valuation of shares arrived by the assessee on the basis of DCF method, impugned addition as made on the basis of net asset value method is liable to be deleted. The rejection is unjustified as the valuation report is required under Rule 11UA of The Income Tax rules is based on the future aspects of the company at the time of issuing the shares, it may vary from the actual figures depending on the market condition at the present point of the time. 24. Thus, keeping in view the entire facts of the case, the reports of the valuer, the comparison of the actual and projected revenues, provisions of Section 56(2)(viib) and keeping in view the order of Co-ordinate Bench ofTTAT in the case of Cinestaan Entertainment Pvt. Ltd. 177 ITD 809 wherein it has been held that the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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