TMI Blog2022 (8) TMI 795X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not verify the above valuation by assessee. Now assessee has tried to substantiate the same before us. In view of above additional evidences submitted by the assessee, we direct the assessee to justify the share valuation before the learned assessing officer as per explanation (a) (ii) of section 56 (2) (viib) - We direct the learned AO examine methodology of working adopted by the assessee by including market value of certain assets only to certain extent as well as the value of quoted equity shares at indicative market value but considering only part of such market value for the purpose of valuation. The above working given by the assessee is strange; as it is not of the date of on which the shares are issued and also it includes only part of the market value of some of the assets , at its own whims and fancies. Valuation needs to fulfill the criteria of satisfaction of the AO , therefore, it is prerogative of ld AO to apply his mind to it and then decide. If , the ld AO is not satisfied with such valuation , the only option left with ld AO is to value shares according to Rule 11 UA of The IT Rules, which ld AO has already done as per net assets value method, against which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t non-interest-bearing funds have been utilized , or proper interest has been charged. The AO may examine the claim of the assessee and decide the issue afresh. - ITA No. 1288/Mum/2019 And ITA No. 1644/Mum/2019 - - - Dated:- 17-8-2022 - Shri Vikas Awasthy, JM And Shri Prashant Maharishi, AM For the Assessee : Ms Ritika Agarwal, AR For the Revenue : Shri Hoshang B. Irani, DR ORDER PER PRASHANT MAHARISHI, AM: 01. These are the cross appeals filed by the assessee as well as The learned Joint Commissioner of Income-tax (OSD) 2(3)(1) (the learned Assessing Officer) for A.Y. 2015-16 against the appellate order passed by The Commissioner Of Income-Tax (Appeals)-6, Mumbai [the learned CIT (A)) dated 17th December, 2018. 02. The learned AO in ITA No. 1288/Mum/2019 has raised solitary ground of appeal as under:- 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in restricting the disallowance u/s 14A to exempt income earned by the assessee, when there is no provision in the Income Tax Act 1961 and Income Tax Rules 1962 which restricts the disallowance u/s 14A to the exempt income earned by the assessee. 03. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoked the provisions of Section 56(2) (viib) of the Income-tax Act, 1961 (The Act) and asked assessee to justify premium. Assessee did not submit any justification for the same except valuation report as above. The learned Assessing Officer found that assessee has incurred a huge loss since F.Y. 2013-14 till F.Y. 2016-17 and held that there is no cash flow available. According to the learned Assessing Officer, the assessee has not provided any justification for the verification of the share valuation which should have been carried out as per Rule 11UA of Income Tax Rules, 1963 (The Rules) considering the book value of the assets or Discounted Cash Flow method. He also noted that share premium is credited on 31st March, 2015, whereas the assessee has taken the value of shares from the balance sheet as on 31st March, 2014 as per Net Asset Value method. He also found that assessee did not provide valuation as per Discounted Cash Flow Method. Therefore, learned Assessing Officer proceeded to value shares as per book value of the asset as per Rule 11UA of the Rules. He valued the shares at ₹315.35 per share, but assessee has received ₹3136.40 per share, therefore made an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of such loan to the related parties and nor there is a case that assessee has own funds or non interest bearing funds higher than the loans and advances given to the related parties without charging interest. Accordingly, he confirmed the disallowance of ₹1,01,20374/- under Section 36(1)(iii) of the Act. iii. With respect to the disallowance under Section 14A of the Act of ₹ 3,46,18,729/-, he found that exempt income is only ₹17,910/-, disallowance cannot exceed exempt income. Accordingly, he restricted the disallowance under Section 14A of the Act to the extent of ₹17,910/-. 07. Assessee and ld AO both are aggrieved with the order of the learned CIT (A) and in appeal before us. 08. The learned Assessing Officer is aggrieved with the deletion of disallowance and restricting it to only exempt income of ₹17,910/-. We have heard both the parties on this aspect. We find that as the exempt income earned by assessee is merely ₹17,910/-, the disallowance under Section 14A of the Act cannot exceed the sum. The learned CIT (A) allowed the relief to the assessee following the decision of Hon'ble Delhi High Court in case of Cheminvest Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive vehemently objected to the additional evidences and submitted that assessee before the learned Assessing Officer as well as the learned CIT (A) did not submit these documents and therefore, it may not be admitted now. He further submitted that there is no justification by the assessee as to why these two evidences were not submitted before lower authorities. 013. We have carefully considered the application of the assessee for admission of the additional evidence. We find that, before ld AO, assessee submitted valuation report of equity shares of assessee company dated 30 November 2014 wherein in para number 4.1 it is stated that as per the net asset value method of valuation of equity shares one equity share of Rs 100/- each fully paid up works out to ₹ 3136/- . Along with that report a worksheet for valuation of equity shares was attached where valuation of a flat at New Delhi which has a book value of ₹ 79.14 lakhs which has the indicative market value of ₹ 28.66 crores but considered for valuation of shares only to the extent of ₹ 21.51 crores being only of the market value. Further assessee has the non-current investment in quoted equity share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 100 per share and at a premium of ₹ 3036.40 per share. Accordingly total nominal amount of equity share capital was ₹ 685,500 and total premium amount is ₹ 20,814,500/ . For justification of the share premium assessee submitted the valuation report dated 30 November 2014 of the chartered accountant who has valued the total value of those shares at ₹ 3136 per share as at 31/3/2014. 017. According to the provisions of Section 56 (2) (viib) provides that where a company, in which public is not substantially interested, receives in any previous year from any resident any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be chargeable to tax as income of the company under the head income from other sources . The explanation (a) defines that fair market value of the shares shall be (1) as may be determined in accordance with such method as may be prescribed i.e. rule 11 UA of the income tax rules, (2) as may be substantiated by the company to the satisfaction of the assessing officer based on the value, on the date of issue o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case on the basis of submission made by the assessee. Learned AO may also carry out such inquiries in accordance with the law, as he may deem fit. The assessee is also directed to justify the valuation supported by the proper documentation as well as any other information to justify share valuation. 018. Per ground numbers 5 6 assessee challenges disallowance of interest expenses , claim of the assessee is that the advances were made by assessee from interest-free funds and could not be considered for interest disallowances and further the loan given of ₹ 10.75 crores is not interest free as claimed by the AO, as assessee has charged interest thereon. 019. The assessee submitted that it has paid interest of ₹ 39,320,207/ with respect to the loan taken from three different parties. Assessee submitted that it has taken loan from ILFS financial services Ltd on 26th of March 2015, from Religare Finance in Ltd on 25th of March 2013 and shawney Kirkwood private limited on 27th of March 2014. The assessee also claims that a loan of ₹ 29.80 crores was given, received back of ₹ 19.5 crores, resulting in closing balance of ₹ 10.75 crores from dynamic te ..... X X X X Extracts X X X X X X X X Extracts X X X X
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