TMI Blog2018 (9) TMI 2020X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the holding company at cost . The assessee had received 52,86,062 equity shares of Asian Paints Ltd. from its holding company i.e. Geetanjali Trading Investment Pvt. Ltd. and since the said holding company holds 100% shares of the assessee-company, the said transfer is exempt u/s 47(iv) of the Act. Further, section 56(2)(viia) does not apply to shares of a quoted company (Asian Paints Ltd.) received by the assessee. Therefore, the question of valuation of these shares at market price does not arise. We find that the assessee had submitted computation of value per share under Rule 11UA of M/s Suprasad Investment Trading Co. Pvt. Ltd. along with balance sheet as on 31.03.2012 vide letter dated 28.01.2016. It is evident from the official seal dated 28.01.2016 of the office of Asstt./Dy. CIT-8(2)(1) Mumbai, indicating the receipt. Rule 11UA as in force in AY 2013-14 does not provide to replace fair value of quoted shares to book value and therefore, the value derived by the DCIT 4(1)(1) cannot be substituted to the value as derived under Rule 11UA. Rule 11UA, during the relevant period, provides for valuation of unquoted equity shares by adopting the amount as per boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the said A.O. completed the assessment u/sec 143(3) after proper inquiries and verification of relevant documents to her satisfaction and in compliance of the provisions of sec. 56 (2)(viia) r.w. Rule 11UA (1) (c) (b) and therefore the said order was not erroneous and prejudicial to the interest of the revenue. 1.3 Without prejudice to above, the said Ld. PCIT erred in not considering the fact that the appellant had never acquired unquoted shares of M/s Omega Properties Pvt.Ltd. and M/s Dakshina Properties Pvt.Ltd. and therefore, examination on valuation of the said two companies U/Rule 11 UA(1)(c)(b) by the said A.O. was not required, 1.4 The said Ld. PCIT erred in not considering the fact that the appellant had acquired the unquoted equity shares of M/s Suprasad at a fair market value of ₹ 7,262/- per share based on the valuation report of a professional firm whereas the value of the same determined on the basis of book value as provided u/s 11UA(1)(c) (b) was ₹ 1,490/- per share and therefore the said CIT erred in setting aside the assessment. 1.5 Without prejudice, to above the said Ld. CIT(A) erred in not appreciating the fact that the Rule 11UA(1)(c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of share of Suprasad Investment Trading Co. Pvt. Ltd. (c) FMV is applicable only from 01.04.2018 in Rule 11UA and not earlier. Stating the above facts, the assessee submitted before the PCIT that the assessment order passed by the AO is neither erroneous nor prejudicial to the interest of revenue and therefore, following the decision in Malabar Industries Co. Ltd., action u/s 263 is not warranted in this case. 3.2 However, the PCIT was not convinced with the above explanation of the assessee and referring to (i) computation of FMV as per the assessee, (ii) FMV as on 31.03.2012 of Omega Properties Pvt. Ltd. and Dakshina Properties Pvt. Ltd. and (iii) computation of FMV of shares as done by the DCIT-4(1)(1), Mumbai, found that there was considerable variation in valuation of shares as done by the AO as per the proposal and as submitted by the assessee in the course of proceedings before him. The assessment order passed does not reveal that a detailed examination of acquisition of assets and applicability of section 56(viia) and Rule 11UA was undertaken in acquisition of shares of Suprasad Investments Trading Co. Pvt. Ltd. In view of the above reasons, the PCIT set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said holding company holds 100% shares of the assessee, the said transfer is exempt u/s 47(iv) of the Act. Further, section 56(2)(viia) does not apply to shares of a quoted company (Asian Paints Ltd.) received by the assessee. Therefore, it is stated that the question of valuation of these shares at market value does not arise. Further, the Ld. counsel submits that the assessee had submitted computation of value of share under Rule 11UA of M/s Suprasad Investment Trading Co. Pvt. Ltd. along with the balance sheet as on 31.03.2012 vide letter dated 28.01.2016. The value of shares of M/s Suprasad Investment Trading Co. Pvt. Ltd. as worked out under Rule 11UA is ₹ 1,490/- per share and the assessee had purchased these shares at ₹ 7,262/- per share. The Ld. counsel also submits that Rule 11UA as in force in the impugned assessment year does not provide and require to replace FMV of quoted shares to book value and therefore, the value derived by the DCIT 4(1)(1) cannot be substituted to the value as derived under Rule 11UA. It is categorically stated by him that the market value under Rule 11UA is to be worked out by dividing the net worth (i.e. share capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Investments Trading Co. Pvt. Ltd. Further, the valuation of shares of M/s Suprasad Investments Trading Co. Pvt. Ltd. necessitates the valuation of shares of Omega Properties Pvt. Ltd. and Dakshina Properties Pvt. Ltd. and these were not done by the AO. Thus the Ld. DR supports the order passed by the PCIT. 6. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. We find that the assessee had not acquired any shares in Geetanjali Trading Investment Pvt. Ltd. during the impugned assessment year and therefore, the question of furnishing details of the said shares does not arise. It is stated in Note No. 8(3) of the Balance Sheet that during the period following investments of Asian Paints Ltd. have been transferred from the holding company at cost . The assessee had received 52,86,062 equity shares of Asian Paints Ltd. from its holding company i.e. Geetanjali Trading Investment Pvt. Ltd. and since the said holding company holds 100% shares of the assessee-company, the said transfer is exempt u/s 47(iv) of the Act. Further, section 56(2)(viia) does not apply to shares of a quoted company (Asian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eet; PV= the paid up value of such equity shares; 6.1 A similar issue arose in M/s Minda SM Technocast Pvt. Ltd. (supra). The AY is 2014-15. The facts are that the assessee had acquired shares of M/s Tuff Engineering Pvt. Ltd. (in short TEPL ) at ₹ 5 per share. The shares were acquired by the assessee from three companies. The assessee claimed to have valued the shares of TEPL as per the provisions of Rule 11UA and filed a copy of the report prepared by the Chartered Accountants in support of its claim to justify the price of shares at which these were required. However, the AO was of the view that the assets declared by TEPL in its balance sheet should have been valued as per the circle rate while determining the value of shares acquired by the assessee. Accordingly, the AO determined the value of shares at ₹ 45.72 per share of TEPL and treated the difference of ₹ 40.72 as income from other sources u/s 56(2)(viia) of the Act. The view taken by the AO was subsequently confirmed by the Ld. CIT(A). In appeal, the Tribunal vide order dated 07.03.2018 held : 6.4 On the plain reading of above Rule, it is revealed that while valuing the shares the book value ..... X X X X Extracts X X X X X X X X Extracts X X X X
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