TMI Blog2021 (12) TMI 439X X X X Extracts X X X X X X X X Extracts X X X X ..... dmitted the same fact of high market valuation of land but further mentioned that the same is not a relevant evidence which is against the provisions of section 56(2)(viib). See UNNATI INORGANICS PVT. LTD. [ 2019 (9) TMI 553 - ITAT AHMEDABAD] and ASG LEATHER PVT. LIMITED, C/O. SUBASH AGARWAL ASSOCIATES [ 2018 (6) TMI 1114 - ITAT KOLKATA] We are of the view that the addition on account of section 56(2)(viib) of the Act was based on wrong interpretation of the provisions of law ignoring the evidences directly relevant to the facts of the present case - Decided against revenue. - ITA No.173/Ind/2020 (Assessment Years: 2014-15) - - - Dated:- 4-10-2021 - HON BLE RAJPAL YADAV, VICE PRESIDENT AND HON BLE MANISH BORAD, ACCOUNTANT MEMBER Revenue by: Shri Harshit Bari, Sr. DR Respondent by: S/Shri Mahesh Agrawal Kunal Agrawal CAs, ARs ORDER PER MANISH BORAD, A.M The above captioned appeal filed at the instance of the Revenue for Assessment Year 2014-15 is directed against the order of Ld. Commissioner of Income Tax(Appeals)-I (in short Ld. CIT], Indore dated 21.01.2020 which is arising out of the order u/s 143(3) of the Income Tax Act 1961(In short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bit of provision of section 56(2)(vii)(v) of the Act and is liable to be taxed in the hands of assessee under the head income from other sources . Ld. Assessing officer assessed the income at ₹ 1,14,29,143/- and made the addition of ₹ 2,72,22,105/-. 3. Aggrieved assessee preferred an appeal before the ld. CIT(A) and succeeded. 4. Now revenue is in appeal before this Tribunal. 5. Per contra Ld. Departmental Representative (DR) supported the orders of both lower authorities but could not controvert the contention made by the assessee. 6. Ld. counsel for the assessee vehemently argued to the written submissions and also referred to the paper book running from page 1 to 144 and submitted that fair market value of shares is higher than the consideration received, therefore section 56(2)(viib) of the is not applicable in the present case and accordingly Ld. counsel for the assessee submitted that the addition is unjustified. Ld. counsel for the assessee also filed written submission in support of the claim:- Assessee is a Private Limited Company engaged in the business of trading of trucks. During the relevant assessment year, the assessee had issued 21,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n comparison to the Guideline value of ₹ 418/- Per Sq. Feet. It is submitted that Ld. AO grossly misapplied the provisions of section 56(2)(viib) by only considering Rule 11UA (book value of Net asset option) to determine FMV of the shares while the Explanation (a)(ii) also gives an option to the assessee to substantiate the value of shares based on market value of its tangible and intangible assets. The Ld. AO failed to consider Explanation (a) (ii) while making alleged addition in the case. Legal interpretation of the words in Explanation (a) (ii) of section 56(2)(viib) including Substantiate, Satisfaction value Etc. (Kindly refer Page 71 72 of the Paper book) leads to a conclusion that any competent evidence that proves the market value of the assets is sufficient to satisfy the requirements of the section. Thus, the said valuation report submitted during the assessment proceedings was a relevant evidence which was ignored by the Ld. AO in the valuation of shares. Assessee Contention on Ld. AO views made in assessment order- 1. Revision of market value in Books of Accounts A. Firstly, no requirement in Income Tax Act, 1961 to revise th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value ₹ 1300/- Per sq. Feet (APPROX.) Multiply: Area of Plot of Land 60,040 sq. Feet Total value of land at Gram Khajrana, Indore ₹ 7,80,52,000/- Total consideration received ₹ 2,73,00,000/- Further, we place reliance on the following judgements which are based on similar facts and squarely covers the issue A. Unnati Inorganics (P.) Ltd. v. Income Tax Officer, Ward1(5), Bhavnagar [2019] 109 taxmann.com 165 (Ahmedabad - Trib.) (Copy of order Enclosed) B. ASG Leather (P.) Ltd. v. Income Tax Officer, Ward-15(1), Kolkata [2018] 95 taxmann.com 151 (Kolkata - Trib.) (Copy of order Enclosed) 1. In view of above mentioned facts, circumstances and Judicial pronouncements, it is submitted that addition made of ₹ 2,72,22,105/- on account of section 56(2)(viib) is based on wrong interpretation of the provisions of law and ignoring the evidences which are directly relevant to the facts of the case. Hence, we humbly pray to the Hon ble Bench to kindly sustain the order of Ld. CIT (A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 1301.12 per sq. ft. and total FMV shall be ₹ 7.81 Crores (Approx) which is much higher than the FMV determined by the registered value and the bankers while providing credits. In view of the above discussion, in my considered opinion, the valuation of shares has been in accordance with the provision of section u/s 56 (2)(viib) - (Exp (a) ii) of Income Tax Act, 1961. There is no condition specified in the act that the appellant was required to revise the value of its assets in the books before issue of shares as has been impressed upon by the AO in assessment order and remand reports. The FMV of shares is required to be the higher of the one determined u/s 11UA of the Income Tax Rule in accordance with Exp.(a)(i) or the one determined on the basis of valuation of assets on the date of issue of shares as per Explanation (a) ii of section u/s 56(2)(viib) of the Income Tax Act, 1961. Undisputedly, the much higher value has been worked out in later situation. Therefore, the AO was not justified in adopting total FMV of shares at ₹ 77,895/- @ 3.70% as calculated under Rule 11UA. The reliance is placed on the decision of Hon'ble B Bench of Kolkata I.T.A.T. (SMC) in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above, we find that Explanation (a) (ii) of section 56(2)(viib) leads to a conclusion that any competent evidence that proves the market value of the assets is sufficient to satisfy the requirements of the section. Thus, the said valuation report submitted during the assessment proceedings was a relevant evidence which was ignored by the Ld. AO in the valuation of shares. 10. We further find that the assessee had relied on the valuation report of the land in Gram Khajrana to substantiate the value of shares. The valuer is Government approved valued and an expert and Property valuation depends upon many factors which an expert after considers and then come to his conclusion. Also, the valuation was conducted by bank empaneled valuer for the purpose of granting loan to assessee due to which it has high credibility. Further we find that the assessee had established through various evidences submitted during appeal proceedings that even if Guideline value of land is considered than also the valuation of land is very high. Even the Ld. AO in its remand report, admitted the same fact of high market valuation of land but further mentioned that the same is not a relevant evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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