TMI Blog2022 (1) TMI 1316X X X X Extracts X X X X X X X X Extracts X X X X ..... holders should be considered. The definition has two limbs: The first limb applies in a situation where the Balance sheet is drawn on the date of valuation and the second limb of definition applies in a situation where no Balance Sheet is drawn on the date of valuation. In the instant case undisputedly on the date of allotment of shares i.e. 31.3.2016, a balance-sheet was drawn by the assessee albeit the said balance sheet was unaudited on that date. The FMV of the shares was determined on the basis of said balance-sheet. The said Balance-sheet was subsequently audited by the Auditors of the company and ostensibly, there was no difference in the financials of tentative balance-sheet drawn on 31.03.2016 after audit by the Auditors. Since, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a private limited company. During the period relevant to assessment year under appeal, the assessee had allotted 31950 shares of Rs. 10/- each at premium of Rs.10/- i.e. aggregating to Rs.20/- per share to the family members and related group companies on 31.03.2016. In scrutiny assessment proceedings, the Assessing Officer (AO) issued show cause as to why Fair Market Value (FMV) of shares at Rs.17.32 per share based on audited Balance Sheet as on 31/3/2015 be not adopted under section 56(2)(viib) of the Act. The assessee explained that the shares were allotted on 31.03.2016 and hence, the FMV as on 31.03.2016 would be applicable. The AO rejected the FMV of shares determined by the assessee on the basis of Average NAV as on 31.3.2015 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e valuation date which has been approved and adopted in AGM, would not apply. As on the date of allotment of shares in the instant case, balance-sheet was available. The ld. AR pointed that the combined reading of Explanation 56(2)(viib) refers only to the value on the date of issue of share irrespective of audit of such figures and even the provisions of section 11UA(b) gives more emphasis on drawing of balance-sheet on the date of allotment of fresh shares. There is no requirement that the same should be audited on the same date. Thus, FMV on the basis of balance-sheet drawn on the date of allotment should be considered. 4.2. The third contention of the ld. AR is that as per the provisions of Rule 11UA(c)(b), value of shares as on 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -sheet has been defined in Rule 11U(b). As per aforesaid definition, balance-sheet should have been duly audited by the Auditor of the Company appointed under section 224 of the Companies Act, 1956. Thus, on the date of allotment of shares i.e. 31.03.2016, the only audited balance-sheet available was as on 31.03.2015, therefore, the AO has determined the FMV of share on the basis of audited balance-sheet available on the date of allotment of shares in accordance with the provisions of Rule 11UA. The ld. DR vehemently supported the assessment order and the order of CIT(A) and prayed for dismissing the appeal of the asssessee. In support of her contentions, placed reliance on the decisions referred by the CIT(A) in the impugned order i.e. (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnexed thereto and forming part of the accounts) drawn up as on a date immediately preceding the valuation date which has been approved and adopted in the annual general meeting of the shareholders of the company; and (ii) in other cases,- (A) in relation ................................ A bare perusal of the definition of balance-sheet above would show that for the purpose of determination of FMV under rule 11UA, the balance-sheet should be drawn on the date of valuation and the same should also be audited by the Auditor of the company and in case the balance-sheet on the date of valuation is not drawn, the balance-sheet drawn on a date immediately preceding the valuation date and audited by the auditors of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t should be audited by the Auditor of the company, the said condition is also satisfied as the Balance sheet drawn on 31.3.2016 was subsequently audited with purportedly no change in financials. In other words, the twin conditions mandated under Rule 11U(b) for a balance sheet on the basis of which valuation is to be made i.e. (i) The Balance Sheet should be drawn of the date of valuation; and (ii) The Balance Sheet should be audited by the Auditors of the Company appointed under the provisions of the Companies Act; are satisfied in present case. In our considered opinion, the emphasis is on drawing of balance sheet on the date of valuation. The rule does not mandate that the balance sheet should also be audited on the date o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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