TMI Blog2021 (9) TMI 1091X X X X Extracts X X X X X X X X Extracts X X X X ..... 68. Our aforesaid findings are duly supported by the binding judicial pronouncement of Hon ble Bombay High Court in the case of Vodafone M-Pesa Ltd. V/s PCIT[ 2018 (3) TMI 530 - BOMBAY HIGH COURT ] wherein it was held that there was no immunity from scrutiny of the valuation report and AO was entitled to scrutinise the valuation report and determine a fresh valuation either by himself or by calling for a final determination from an independent valuer to confront the petitioner. However, the basis has to be the DCF Method and it is not open to him to change the method of valuation which has been opted for by the Assessee. Here is a case where the shares had been subscribed by unrelated independent parties, who were one of the leading industrialists and businessman of the country, and after considering the valuation report and future prospect of the company, had chosen to make investment as an equity partners in a 'start-up company' like assessee, then it cannot said that there is any kind of tax abuse tactics or laundering of any unaccounted money. It cannot be the unaccounted or black money of investors as it is their tax paid money invested, duly disclosed and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me from other sources. For the purpose of this section, FMV shall be the value, higher of the following: (a) as may be determined in accordance with such methods as may be prescribed (methods prescribed under Rule 11UA are Book value Method (NAV) and Discounted Cash flow method); or (b) 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. Assessment Proceedings 3.1 In the above background, the material facts are that the assessee being resident corporate assessee issued on 30/03/2013 15572 Equity Shares of face value of ₹ 10/- each at a premium of ₹ 1024/- per share. The assessee is stated to be engaged in rendering investment and risk management advisory services. The shares have been issued to sole investor namely Shri Jayant Davar. The investments are duly supported by PAN, financial statement of the investor, copies of share certificates, Form No.2 filed by the assessee with Reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made in the valuation under DCF method was not furnished by the assessee. Therefore, the said method was correctly rejected by Ld.AO and the additions were justified. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 5. Upon careful consideration of factual matrix, it could be gathered that the assessee has issued certain shares at premium of ₹ 1024/- per share. The premium has been received in accordance with the valuation report of the valuer. Upon perusal of valuation report, it could be seen that the valuer has adopted DCF method to value the share which is one of the prescribed method under Rule 11UA to value unquoted equity shares. Under DCF method, further cash flows generated out of the business would be discounted to arrive at net present value of these cash flows. The methodology would certainly require estimation of revenues, expenditure and cash projections and would involve estimations and assumptions. Therefore, the actual result may not be in line with the valuation made on the basis of assumptions / estimation. Hence, there is clear fallacy in the observation of lower authorities that the valuation was to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of making decision. When the values are replaced subsequently, it is not valuation but evaluation i.e. moving the post of result determined out of projections. Similar is the decision of Delhi Tribunal in Cinestaan Entertainment (P) Ltd. vrs. ITO (2019) 106 taxmann.com 300 wherein the coordinate bench concurred with assessee s submissions that the deeming provisions of Sec. 56(2)(vii) could not be invoked on normal business transaction of issuance of shares unless it has been demonstrated by the revenue authorities that the entire motive for such issuance of shares on higher premium was for the tax abuse with the objective of tax evasion by laundering its own unaccounted money. The deeming fiction was to be strictly interpreted and there was no mandate to the Assessing Officer to arbitrarily reject the valuation done by the assessee on his own surmises and whims. It is a trite law, well settled by the Supreme Court, in the case of Commissioner of Customs (Imports) v. Dilip Kumar Sons [20161 69 taxmann.com 206/55 GST 764 that in the matter of charging section of a taxing statute, strict rule of interpretation is mandatory and if there are two views possible in the matter o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the assessee submitted copy of ITR, confirmation, bank statements etc. However, it did not submit copy of Balance Sheet and Profit Loss Account to prove the creditworthiness. Further, the major investor i.e. M/s Parth Infracon Private Ltd. was incurring losses and the investments in assessee s entity were funded out of funds provided by another group entity. Therefore, protective additions were to be made u/s 68. Upon further appeal, Ld. CIT(A), applying the same reasoning, confirmed the additions made by Ld. AO u/s 56(2)(viib). Aggrieved, the assessee is in further appeal before us. 11. We find that facts are pari-materia the same in this year. The valuation report has adopted DCF method of valuation of shares which has been rejected by Ld. AO by alleging that exorbitant estimation of future cash flows were made in the report. However, as observed by us in AY 2013-14, the valuation was as per one of the prescribed method and adoption of any method was optional for the assessee. Therefore, our findings as well as adjudication as for AY 2013-14 shall mutatis mutandis apply to this year also so far as the addition u/s 56(2)(viib) is concerned. 12. The Ld. AO, in the alt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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