TMI Blog2022 (4) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... y to justify share premium charged by it. In this case Assessee Company issued the shares on premium first and then invested the same in the shares of M/s Spotless Laundry Services Ltd. to justify its net worth or in other words NAV. The event which is to take place first, occurred second and vice-versa. In the present appeal AO has not challenged the method of valuation adopted by the assessee. He simply tried to rectify the figures wrongly adopted by the assessee as discussed in detail with the help of tables demonstrating funds movement of the assessee.In our considered opinion looking at the records before us and facts of the case, we find no defect in the order of the authorities below and the order passed by the CIT (A) is confirmed. Application of Valuation of unquoted shares under Rule 11UA of Income Tax Rules, 1962 - The grounds of appeal taken by assessee has been considered and found to be baseless as Rule 11UA of Income Tax Rules, 1962 falls under chapter- H-determination of Fair Market Value of the property other than immovable property. Chapter-H inserted by the I.T. (Second Amdt.) Rules, 2010, w.e.f. 01.10.2009. Rule 11UA (1) was simply renumbered as Sub-R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per share at ₹ 27.90 Which was below the face value per share disregarding the legal position that a company is prohibited from issuing shares at discount in terms of section 53 of the Companies Act 2013. 3. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in appreciating that Rule 11 UA of Income Tax Rules, 1962, which determines the valuation of unquoted shares and being a provision which purports to determine the income which is chargeable to tax was introduced by Income Tax (Fifteenth Amendment) Rules, 2012, came into effect on November 29, 2012, and so the said valuation rules cannot be applied. 4. On the facts, and in circumstances of the case, and in law, without prejudice to grounds of appeal considered elsewhere, addition u/s 56 of the Income Tax Act, 1961, ought to be restricted to the amount received by the appellant on or after November 29, 2012, and not for amounts received in earlier years and also for amounts received prior to November 29, 2012, during the previous year 2012-13. 3. Subsequently, vide petition dated 28th July, 2021 for admission of additional ground under rule 11 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uation method which is almost in line with Rule 11UA of the Income Tax Rules, 1962 (for short the Rules ) . All the five shareholders subscribed to the shares of the assessee @ ₹ 100/- per share + ₹ 900/- as premium. Total shares subscribed as per Exhibit -9 of the PB are 12,600 equity shares. 8. Assessee worked out premium on each shares as under: ASSET Investment in Equity Instrument 1. (SPOTLESS LAUNDRY SERVICES PVT. LTD.) 1, 25, 63,000 2. Bank Cash balance 92,967 LESS: Provision for Expense 13,000 NET ASSET 1, 26, 42,967 No. of Share issued 12,600 Therefore, value per Share (rounded off to nearest ten) 1,000 09. The Assessee was submitted that, even otherwise, if method prescribed under Rule 11UA is adopted, it will fetch the same result. 10. The Assessing Officer made calculation as per Rule 11UA as under: A 1,26,55,967 1,26,55,961 A= Book value of Assets L 13,000 L= Book Value of liabilities PE 2,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. vide page nos. 15 16 of PB and ledger account of share application money received from Akash Dharamsey, Devchand Dharamsey, Dr. Meera Dharamsey, Gorden Jagwani and Neetu Jagwani vide page nos. 17 to 21 of PB. From the aforesaid documents relied upon by the assessee, we have noticed that the assessee had tried to justify the flow of money for the investment in the shares of M/s. Spotless Laundry Services Ltd. 14. During the course of argument, Ld. AR for the assessee was asked to place (within 3 days) on record the Balance Sheet of M/s Spotless Laundry Services Ltd. in which huge investments has been made to examine the issue, if it is a genuine transaction. However Ld. AR failed to place the same on record. So, adverse inference has to be drawn, that it is not a genuine transaction of assessee. 15. We have examined the impugned order passed by the Ld. CIT (A), who has uphold the addition made by the AO by specific findings in his order. When we examine the findings of Ld. CIT (A) in the light of ledgers maintained/produced by the assessee available at page nos. 17 to 21 and 14 of the PB, relied upon by the assessee during the course of argument, there is no sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estment in M/s Spotless Laundry Services Ltd. Date Amount Voucher Type Total (Rs.) 24.08.2009 1,00,000 Cheque Payment 1,00,000 03.11.2009 50,00,000 Journal 50,00,000 18.03.2010 24,70,000 Journal 24,70,000 30.06.2010 30,000 Journal 30,000 28.02.2013 49,50,000 Journal 49,50,000 Total ₹ 1,25,50,000 From the aforesaid table it is proved on record that at the time of alleged investment, assessee has no money of its own. Out of total investment of ₹ 1, 25, 50,000/- only 1,00, 000/- was paid rest of the acquisition is through journal entry and thereafter two more payments were made, i.e. ₹ 30,00,000/- on 28-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s citations are with reference to a situation where AO was not agreed with the method adopted by the assessee and tried to plant his/her own method of valuation. Where as in the present appeal AO has not challenged the method of valuation adopted by the assessee. He simply tried to rectify the figures wrongly adopted by the assessee as discussed in detail with the help of tables demonstrating funds movement of the assessee. 20. In our considered opinion looking at the records before us and facts of the case, we find no defect in the order of the authorities below and the order passed by the CIT (A) is confirmed 21. In the result appeal of the assessee is dismissed. 22. Ground Nos. 3 4 are inter-related, hence, discussed, analyzed and disposed of as under: 3. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in appreciating that Rule 11UA of Income Tax Rules, 1962, which determines the valuation of unquoted shares and being a provision which purports to determine the income which is chargeable to tax was introduced by Income Tax (Fifteenth Amendment) Rules, 2012, came into effect on November 29, 2012, and so ..... X X X X Extracts X X X X X X X X Extracts X X X X
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