TMI Blog2021 (7) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... ed date. Hence, the appointed date of the scheme approved by the High Court is 01/04/2013. As scheme approved by the Hon ble High Court provided an appointed date to be 01/04/2013 or any other date directed by Hon ble High Court while accepting the scheme Hon ble High Court has not directed any change in appointed date, we are of the considered opinion, the appointed date is 01/04/2013 and hence, the value considered by the assessee, which is nearer to the date is appropriate. The valuation date taken by the AO is not in accordance with the appointed date approved by Hon ble High Court and in this view of the matter appointed date taken and the valuation done by the AO is incorrect. Hence, we do not find any infirmity in value taken by the assessee as per the scheme approved by the Hon ble High Court and appointed date therein. Hence, the addition made is directed to be deleted. Appeal by the assessee stands allowed. - I.T.A. No. 6940/Mum/2018 - - - Dated:- 1-7-2021 - Shri Shamim Yahya (AM) And Shri Amarjit Singh (JM) For the Assessee : Shri Vimal Punmiya For the Department : Ms. Usha Gaikwad ORDER PER SHAMIM YAHYA (AM) :- This appeal by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the year was ₹ 20,04,88,950/-. The assessee was requested by AO to furnish identity of the investor, valuation report of the equity shares and justification of share valuation along with proof of the transactions. The assessee vide submitted the valuation report, Form No.PAS-3 approvals of general body and board of directors and the business transfer agreement approved by Hon'ble Bombay High Court between the assessee and M/s.Vardhaman Developers Ltd. (VDL). The share valuation report showed that the assessee had adopted the Net Asset Value method for computing the valuation shares. It was stated in the valuation report that the values as appearing in the audited books of accounts of the assessee and Amusement Park Undertaking had been taken as on 31.03.2013 and provision account for half year ended 30.09.2013 had been considered for share valuation. It was also stated that the business of operating amusement park of VDL is transferred to its wholly owned subsidiary company i.e.Vardhaman Entertainment Hospitality Pvt. Ltd, (VE HPL) by way of business transfer agreement. As per the agreement the share of VE HPL had to be transferred to VDL and the assessee VE HPL wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company did not change and the assessee company was still a subsidiary company of M/s.VDL. It had been justified that M/s.VDL had kept a capital suspense account for purchase of shares. AO opined that, the valuation of shares as per the book value of asset method had to be taken as net asset value of the assessee on the date of issuance of shares. He observed that since the same was not followed by the assessee, the valuation method adopted by the assessee was not correct. The AO further observed that the assessee, vide its submission dated 27.112017 had stated that the fair market value as per Rule 11UA of the amusement park division as on 31.03.2013 was considered. It has also pleaded that since the transfer of assets liabilities and issue of shares were between a holding company and its wholly owned subsidiary, the transaction was not a bilateral transaction and there was no tax implication involved as even the transfer was also not regarded as transfer within the meaning of section 47(iv) of the Act. The assessee had without prejudice submitted the fair market value per share as on 31.03.2014 at ₹ 196.88. The AO observed that this contention of the assessee was not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value as per provisions of Section 56(2)(viib) of the Act and added it to the total income of the assessee as income from other sources. 4. Upon assessee s appeal Ld.CIT(A) confirmed the order of the AO. He rejected the assessee s contention that transfer in pursuant to Hon ble High Court order effective from a appointed ate, which is the basis of valuation. He also rejected the contention of 5% tolerance, but as per proviso to section 43CA(1) holding it to be prospective. His adjudication in this regards is as under:- The appellant, in their submission, have primarily contended that because their agreement was having an appointed date as 1st April, 2013, the balance-sheet should be considered that of 31.03.2013 and the meaning of Valuation date as mentioned in Rule 11 DA is the date on which the property or consideration, as the case may be, is received by the assessee. The appellant further seeks to contend that they have received the property consequent to this agreement and have incorporated them in their books of account and therefore, the valuation adopted by them is correct. In respect of such contention of the assessee, it is stated that when the approval is grante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, it is stated that the proviso to section 43CA(1) of the Income-tax Act has been inserted by the Finance Act, 2018 and as such, is not applicable to the year under consideration. It is further stated that the said provisions are applicable for determination of full value of consideration for transfer of assets other than capital assets being land or building or both and the same is not relevant for shares issued by a company to another company and where the issue is relating to determination of fair market value of such shares. The assessee has further placed reliance on a number of decisions wherein they have fairly mentioned that the decisions are pertaining to section 50C of the Act but it is the argument of the assessee that the principles laid down in these case laws can be applied to the assessee's case under consideration. In regard to such contention of the assessee, it is stated that determination of fair market value of the property for the purposes of section 50C can have certain latitude and variance having regard to the facts of the case. However, while determining the fair market value of the shares, Rule 11 DA has been prescribed and in such rules, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r half year ended 30th September, 2013 have been considered for valuation of shares. 8. The Net Asset Value Method had been adopted for determining the value of shares. 9. The Fair Market Value has been determined as per Rule 11UA of the amusement park division as on 31.03.2013 (as the appointed date is 01.04.2013) for which the shares were issued. (Paper Book Pg. No. 127) 10. As the Approval of Bombay High Court was pending the appellant had created an Equity Capital Suspense Account in its audited accounts for the year ended 31.03.2014.(Paper Book Pg. No. 130) 11. The effective date of Scheme of Arrangement as approved by the Hon'ble Bombay High Court was 10th September, 2014. 12. M/s. Vardhman Entertainment Hospitality Pvt. Ltd. issued 10,55,205 Equity Shares of ₹ 10/- each at a premium of ₹ 19O/- per share to M/s. Vardhman Developers Ltd., the resulting company during the financial year 2014-15 relevant for AY. 2015-16 based on the valuation detailed in the Scheme of Arrangement as submitted to and approved by the High Court dated 1st August,2014.(Pg. No. 53 to 87of Paper Book). 13. The shares of M/s. Vardhman Entertainment Hospitality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls which would be available at a future date. Thus, the Audited Balance Sheet dated 31.03.2013 was considered for valuation of shares. Further, the Appellant would like to state that the present instance is the case of a corporate reorganization wherein a Holding Company has transferred the assets and liabilities of one of its division to its wholly owned Subsidiary Company, which has in turn, issued shares of the value equal to the value of net asset so transferred. The Appellant vide letter dated 27.11.2017 had also submitted that since the transfer of assets liabilities and issue of shares are between a holding company and its wholly owned subsidiary, the transaction is not a bilateral transaction and there is no tax implication involved as even the transfer is also not regarded as transfer within the meaning of section 47(iv) of the Income Tax Act, 1961. In this regard, the Ld.AO has erroneously mentioned in the assessment order that provisions of section 47 (iv) of the Income Tax Act, 1961 are not applicable since VDL is not a 100% subsidiary of the Appellant. The Appellant is a wholly owned subsidiary of VDL wherein 100% of the shares are held by VDL (out of total 15, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per Ld. AO would be revised as follows: With regard to this above calculation, the Appellant would like to state that in order to avoid undue hardship due to some minor variation in the two values, Finance Act, 2018 has inserted a proviso below Sub-section (1) of Section 43CA which provides that in case if value adopted or assessed or assessable by Stamp valuation authority is higher by an amount which is up to 5% of the actual consideration, then no addition shall be made, However, being a proviso inserted to avoid hardship to the assessees, it should be applied with retrospective effect from A.Y 2014-15 the year of introduction of Section 43CA. In view of the same, the said proviso can be said to be applicable for the year under consideration. In the instant case, the value as considered by the Appellant and that by the AO is less than 3% which is below the tolerable limit of 5% as prescribed by the aforesaid section. Accordingly, addition made under section 56(2) (viib) is not warranted. Without prejudice to the above, The Appellant would like to state that the difference between the valuation as considered by the Appellant and that computed by the AO is below 3% ..... X X X X Extracts X X X X X X X X Extracts X X X X
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