TMI Blog2019 (8) TMI 1858X X X X Extracts X X X X X X X X Extracts X X X X ..... d be a chaos where any Assessing Officer can pass order in the case of any assessee even when he does not have any territorial jurisdiction over that assessee. Thus, we are of the opinion that an order u/s. 127 is mandatory which has to be passed by the competent authority if jurisdiction is transferred from one Assessing Officer to another Assessing Officer who otherwise does not have the jurisdiction over the assessee. In this case, the Ld. CIT-DR had brought on record that there is some kind of transfer order which has been passed on 19.02.2016 vide transfer order no. 200000047799 wherein the PAN of the assessee has been transferred from Central Circle-20 to Ward-21(1) Delhi. If such an order has been passed, then can it be reckoned that it is an order passed u/s.127, is not very clear? Before us, no specific transfer order has been passed except for transfer order number and the transfer date from the website. Even till the conclusion of the hearing, no specific order was produced before us. Under these circumstances and in order to ascertain the correct facts, we are of the opinion that on this specific issue the matter is remanded back to the Assessing Officer, who shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or provision where a transaction relating to purchase of shares of several companies are undertaken then the fair market value of shares of all the companies needs to be aggregated or any kind of set-off of positive and negative figure is to be given, i.e., where the FMV of a share is negative or FMV is lesser than the purchase value, then same is to be adjusted with transaction of shares of a company where FMV is positive. In case where purchase consideration is more than FMV, then clause (viia) is not be attracted, because the statute has clearly provided that this section would be invoked only when difference between the purchase consideration of Fair Market Value of a share of a company is more than Rs.50,000/-. Thus, provisions would be applicable share-wise qua the same company. Besides this, reasoning given by the Ld. CIT (A) on this point as discussed above is reasonable and plausible to which we also agree. Accordingly, such a contention raised by the ld. counsel is rejected. Contention that Rule 11UA is not workable for the reason that the said Rule provides that the audited balance sheets as on the valuation date should be prepared by the auditor appointed u/s.224 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer and the Ld. CIT (A) are that the balance sheet figures of relevant items for which assessee has claimed adjustment as on 30th March, 2015 and 31st March, 2015 are the same, that is no adjustment has been made in the value of assets in the final figure of assets and liabilities. It has been clarified by the ld. counsel that though for the purpose of accounting standard and disclosure requirement under the Companies Act, the figures of assets have been given in the balance sheet which may be similar to as on 30th March, 2015 and 31st March, 2015, however on the valuation date the balance sheet prepared contains detail notes to the accounts wherein auditors have clearly clarified and qualified certain items which does not represent the value of the assets. In the case of the real estate/construction companies, certain items like construction and development expenses, finance cost, advances made to the suppliers, contractors, unamortized amount of deferred expenditure, preliminary expenses and certain other items which due to method of accounting under accounting standard or under the Income Tax Act are capitalized but eventually are deferred for a period of time which either be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration book value of the asset and the book value of the liabilities - HELD THAT:- We are of the opinion that any borrowed or interest cost capitalized to the value of the asset cannot represent the real value of any asset for the purpose of determining the book value so as to determine the Fair Market Value of shares. Claim of bad debts - Even if the company has not written off the bad debt, but auditors have found that it is not recoverable for many years and have reduced from the value of asset, then same cannot be held to represent the value of the asset on the date of valuation, Simply because the amount has not been written off as on 31st March, 2015, it does not mean it is to treated as part of value of asset. Accordingly, AO is directed to reduce the said amount from the value of the asset while valuing the book value of asset. Coming to the electrical material, tiles, marbles and hardware damaged but forming part of asset - We agree with the contention of the ld. counsel that such payment for EDC and fee etc. relating to such portion of land which has been compulsorily left for public at large but is not related to any open area, roads, parks, hospital by the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has raised following grounds:- 1. That under the facts and circumstances the impugned A.O. being ITO Ward-21(1) New Delhi who framed the asstt. was having no legally valid jurisdiction to frame the asstt. in the absence of complying with the mandatory requirements of Sec. 127/127(2) of the I.T. Act for transfer of existing jurisdiction from Central Circle-16 (now Central Circle-20) to the ITO WardI. 21(1), New Delhi, specially when the PCIT of Central Circle-16 and ITO Ward-21(1) are different. 2. That under the facts and circumstances, both the lower authorities grossly erred in law as well as on merits in making and confirming the addition of Rs. 135,11,67,220/- u/s.56 (2) (viia) r/w Rule- 11UA. 2.1 That under the facts and circumstances, both the lower authorities exceeded the scope of this limited scrutiny asstt. by extending his examination towards applicability of sec.56 (2) (viia) r/w Rule-11UA against examination correctly to be done only u/s.68 of the I.T. Act, thus the examination and addition u/s.56 (2) (viia) since not permitted by Pr. CIT, as mandated by instructions, has been done without jurisdiction, consequently the resultant addition being wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnished. The Assessing Officer then downloaded the financial statement as on 31st March, 2015 of these companies from public domain and accordingly, he proceeded to determine the fair market value of the shares of each of the company as per Rule 11UA. As per him, there were substantial difference between the fair market value of the shares of each company and the consideration paid for shares. The details of investment made by the assessee company in the unlisted equity shares in various companies for the year ending 31st March, 2015 were as under: S.No. Name Script in which invest made No. of share purchased Purchase @ per share Total amount of investment (Rs.) 1 Ambience buildcon Pvt Ltd 3,01,211 10 3012110 2 Aman hospitality Pvt Ltd' 48266526 10 482665260 3 Ambience IT Developers Pvt Ltd 2,500 10 25000 4 Greenlin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbience Pvt Ltd 43602756 4.95 216030610 23' Ambience Developers Infrastructure Pvt Ltd. 2404440 100 240444000 24 Ambience Commercial DevelopersPvt Ltd 23620099 21.16 499788490 25 Tropical Infradevelopers Pvt Ltd. 17068 696.57 11889056.76 26 Sky valley Buildcon Put lAd.. 625000 10 6250000 Total 160,69,99,102.2 3. Since assessee had not furnished any details or audited balance sheets for the dates on which investments have been made in various companies, Assessing Officer then carried out survey u/s.133A at the business premises of the assessee to have access of the audited balance-sheets of the various companies in which assessee had made investments during the financial year 2014-15. During the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not possible under the provision of Rule 11UA. 6. The Assessing Officer has dealt with all the objections of the assessee in detail and rejected the same on various counts as per his discussion in the order, which shall be dealt with in the later part of this order. Finally, he computed the excess of Fair Market Value under Rule 11UA over and above the consideration shown by the assessee in respect of investments made by the assessee company in the shares of different companies and worked out the aggregate difference of Rs.135,11,59,300/- in respect of 22 Companies and same was added u/s.56(2)(viia) of the Income Tax Act. 7. Before the ld. CIT (A), assessee raised various objections challenging not only validity of the assessment and additions made therein, on the ground that they are beyond the scope of limited scrutiny but also on merits. One of the objections of the assessee was that the addition which has been made was not the subject matter of limited scrutiny because the case was selected for scrutiny on following counts:- i. Large share premium received during the year (verify applicability of Section 56(2)(viib). ii. Low income in comparison to very high i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther in the nature of transaction or any unaccounted money being transacted from one pocket to another. Thus, Ld. CIT(A) rejected the said contention after giving cogent and detailed reasoning; firstly, the company is an independent entity and the provision of the Companies Act have to be applied with and settlement arrived between its member cannot discharge the assessee from complying with its obligation under the law; secondly, the artificial entity such as a company only acts through its directors and for all practical purpose it is a separate entity altogether distinct from the directors and assessee cannot urge to ignore the separate existence of the company. 10. Another key contention raised by the assessee was that, the Assessing Officer has made the addition on account of difference in excessive Fair Market Value of 22 companies, whereas assessee has made investment in 26 companies. As regards the remaining four companies, difference of Fair Market Value and actual purchase consideration was in negative specifically in the case of following four companies:- Aman Hospitality Pvt. Ltd. Rs. (-) 497890274/- Ambience ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... summarized as under: As regards the adjustment on account of earnest money/adjustments against plots forfeited by the government authorities, Ld. CIT (A) observed that assessee has not submitted any evidence of cancellation of allotment of forfeiture of the amount paid. Hence, the amount claimed by the assessee has not been proved. Further, amount of Rs.106,91,24,800/- which was forfeited by the NOIDA authority was still appearing in the books of Ambience Pvt. Ltd. Secondly, as regards interest cost incurred for purchase /development of plots/land/projects which as per the assessee is a fictitious cost capitalized in the value of assets, the Ld. CIT(A) held that under the provision of Rule 11UA, only the Fair Market Value of the shares is determined and not the property or immovable assets. The Fair Market Value of the shares is determined taking into account book value of the asset and book value of liabilities. He further observed that Assessing Officer in the assessment order has held that as per the provision of Section 36(1)(iii) interest cost incurred on purchase or acquisition of the business asset is to be capitalized till the date asset is put to use; and sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court and no facts have been mentioned and how the judgment of the Court impacts the value of the asset as on 30.03.2015. Lastly, with regard to the adjustment for statutory liability, Ld. CIT(A) held that assessee has not mentioned any figure of adjustment or the name of the company in the valuation of which the said adjustment is sought for. 14. Accordingly, the appeal of the assessee was dismissed. Contention of the Assessee on Legal Issue u/s 127 15. Before us, ld. counsel for the assessee, Shri Raj Kumar Gupta, first of all challenged the validity of assessment order on the ground that Assessing Officer did not had valid jurisdiction to frame the assessment in the absence of any mandatory requirement of transfer order passed u/s.127 from the existing jurisdiction, i.e., from Central Circle-16/20 to the ITO, Ward- 21(1), New Delhi. He submitted that assessee was regularly assessed in Central Circle-16 which is now Central Circle-20, New Delhi. All the earlier assessment order u/s.143(3) were passed right from the Assessment Year 2008- 09 to 2010-11 by Central Circle-16 and the Income Tax Return for Assessment Year 2014-15 and 2015-16 was also filed before Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring; (iii) the authority concerned has to pass a reasoned order. The provision requires reasons shall be given by the authority. The reasons are to be cogent and germane having nexus to the facts of the case. iv) ITO VS. KRISHAN KUMAR GUPTA (2008) 16 DTR (DEL.) (TRIB.) 1 Held Moreover, ITO Ward-33 (2) exercised jurisdiction merely on the basis of information given by ITO, Ward-25(4) and transfer of fde by the said ITO, and the case was not transferred to him by any order passed u/s. 127 by any competent authority - therefore reassessment made by ITO Ward-33 (2) is invalid. v) DGP IIINODAY INDS. LTD. (2007) 13 SOT 733 (MUM.). Held ...Whether for transfer of case u/s. 127 not only reasons are to be recorded prior to transfer of records but also communicated to person concerned held, yes. vi) Sh. Harish Chand Pandey Vs. ITO ITA No.l727/Del/2018 Order Dtd.07.06.18 by Delhi ITAT C Bench. The notice issued and assessment completed by non jurisdictional A.O. It could not' be shown by the revenue as to how the ITO who framed the asstt. got the jurisdiction over the assessee in the absence of order u/s. 127. 16. He further submitted that Section 124(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional High Court in the case of Abhishek Jain vs. ITO, 94 Taxmann.com 355 (Delhi) and CIT vs. S.S. Ahluwalia, 46 Taxmann.com 169 (Delhi). 18. At the time of hearing, we directed the Ld. CIT-DR to ascertain, whether any order has been passed by the competent authority u/s.127 for transferring the case from Central Circle-20 to ITO, Ward-21(1). In response, the ld. CITDR had submitted a screen shot from the Department website which shows that PAN of the assessee has been transferred from Central Circle-20, Delhi to Ward-21(1), Delhi on 19.02.2016 by transfer order no. 200000047799. Thus, he submitted that there was a valid transfer order for transferring the case from one Circle to another and since transfer of the case is within the same city, therefore, no opportunity was required to be given to the assessee. Thus, on the facts as well as in law such an objection raised by the ld. counsel is not tenable. 19. In rejoinder, ld. counsel submitted that the document provided by the ld. DR merely gives detail of PAN jurisdiction and the history of Ward/Circle and the PAN of the assessee which stood transferred from time to time. The main issue for consideration is how the jurisdict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r albeit what has been challenged before us is that, Assessing Officer inherently lacked jurisdiction due to non passing of mandatory order u/s.127(2)(a) by the competent authority. It is now wellestablished principle of law that there is a distinction between lack of jurisdiction and irregular exercise of jurisdiction. The proceedings render void ab initio when the authority taking it has no power to have succinic over the cases. 21. The Hon ble Delhi High Court in the case of Abhishek Jain vs. ITO (supra) had on an occasion to deal with this issue wherein their Lordships have referred to their earlier case of CIT vs. S.S. Ahluwalia (supra) and observed as under: 18. S.S. Ahluwalia (supra), examines several decisions which were relied upon by the assessee in the said case and were held to be not germane and applicable. This decision also explains provisions of Section 127 of the Act and scope and ambit of the said power, to observe that the section does not speak of the transfer of jurisdiction but transfer of case as defined in Section 127. Expression concurrent jurisdiction is mentioned in sub-section (3) to Section 127 of the Act. Elucidating the legal effect of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Commissioner or Commissioners from one Assessing Officer to another Assessing Officer subordinated to them. Sub-section (2) applies where the Assessing Officer to whom the case is to be transferred is not subordinated to the same Director General, Chief Commissioner or Commissioners of the Assessing Officer from whom the case is to be transferred. This is not a case of a transfer under Section 127 of the Act. This is a case in which the assessee had raised an objection stating that the Income-Tax Officer, Ward-1 (1), Noida should not continue with the assessment as the petitioner-assessee was regularly filing returns with the Income-Tax Officer, Ward-58 (2), Delhi. Objection as raised were treated as made in terms of sub-section (3) to Section 124, notwithstanding the fact that there was delay and non-compliance. The Income-Tax Officer, Ward-1 (1), Noida accepted the request/prayer of the petitioner and had transferred pending proceeding to the Assessing Officer, Ward-58 (2), Delhi. Therefore, there was no need to invoke and follow the procedure mentioned in sub-section (2) to Section 127 of the Act. Section 127 of the Act would come into play when the case is to be transferred f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. Thus, we are of the opinion that an order u/s. 127 is mandatory which has to be passed by the competent authority if jurisdiction is transferred from one Assessing Officer to another Assessing Officer who otherwise does not have the jurisdiction over the assessee. 22. However, in this case, the Ld. CIT-DR had brought on record that there is some kind of transfer order which has been passed on 19.02.2016 vide transfer order no. 200000047799 wherein the PAN of the assessee has been transferred from Central Circle-20 to Ward-21(1) Delhi. If such an order has been passed, then can it be reckoned that it is an order passed u/s.127, is not very clear? Before us, no specific transfer order has been passed except for transfer order number and the transfer date from the website. Even till the conclusion of the hearing, no specific order was produced before us. Under these circumstances and in order to ascertain the correct facts, we are of the opinion that on this specific issue the matter is remanded back to the Assessing Officer, who shall examine whether any transfer order has been passed u/s.127 or not. If vide such transfer order number and transfer date the case of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch a deeming provision by Finance Bill, 2010 were mainly anti abuse provisions to counter tax evasion mechanism and to prevent laundering of unaccounted money. When the transfer of share is within the same family owned company then there cannot be situation of abuse of provision of law to avoid tax liability including any laundering of unaccounted income. Further, it was purely a bona fide transaction and there is no allegation of the Department that the transaction is being done for tax evasion or for money laundering purpose or for getting the benefit of such mischief. Thus, if there is a bona fide transaction, the said provision cannot be invoked and in support he relied upon the following Tribunal decisions: (i) ACIT vs. Shri Subodh Menon Bombay ITAT dated 07.12.2018 (ii) Vaani Estate Pvt. Ltd. vs. ITO (ITAT Chennai) dated 27.8.2018 (iii) ACIT vs. Bhagwati Prasad Bajoria, 137 Taxman 75 (Gau) (MAG) (iv) Rajendra Suryavanshi vs. ACIT (2011) 56 DTR (PUNE) (Trib.) 25. His second limb of argument was that Assessing Officer has wrongly considered only 22 companies out of 26 companies and has ignored four companies for the purpose of determination of Fair M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount of Rs.10,56,92,728/- should be reduced. 28. Lastly, on the issue of adjustment in Rule 11UA, he has filed detail written submission. In sums and substance, his contentions are as under: (i) Rule-11UA(1)(c)(b) provides the formula for calculating the FMV of unquoted equity shares on the valuation date. It provides for adopting the assets and liabilities as per the audited balance sheet alongwith notes annexed thereto, as on the valuation date and thereafter to reduce the assets by the items as mentioned in A which provides for excluding such assets in the bal. sheets which do not represent the value of any asset. Similarly, adjustments are also provided in L in the liabilities. (ii) As per the assessee, even for 22 companies, the differential excessive FMV value as per Rule-11UA, after adjustments will calculate only to Rs.7,43,11,624/-. The A.O. has not allowed any adjustment in the assets and liabilities for the reason that the balance sheet figures of relevant items for which assessee claims adjustments as on 30.03.15 and 31.03.15 are the same. CIT (A) too has followed the same reasons apart from mainly adding in the reasons that the documents furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ambiance Pvt. Ltd. 86,83,03,797/- Ambiance Developer Infrastructure Pvt. Ltd. 52,37,48,009/- Ambiance Tower Pvt. Ltd. 38,63,12,000/- Tropical Infradevelopers Pvt. Ltd. 97,52,270/- Alankar Apartments Pvt. Ltd. 5,63,59,323/- Total 184,44,75,399/ The amounts as above have been given in the notes of the audited balance sheet as on 30.03.15. Nature of this amount was explained that, for the purchase of properties, the funds are borrowed on interest and this interest cost is either capitalized or included in the work-inprogress. The capitalized cost of such properties is shown in the balance sheet and as work-in-progress, as the case may be. This borrowing cost could had been, otherwise, shown and claimed in P L A/c year to year. In that case, the value of the asset in the balance sheet will appear at the original purchase cost. Similarly, in such case the work in progress amount in balance sheet will appear at a figure which is without inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the notes of the audited balance sheet. Contention by the Revenue on Merits 29. On the other hand, ld. CIT-DR submitted that the contention of the ld. counsel that the aggregate fair market value of all the 26 companies should be taken including the negative value of shares with respect to four companies, is untenable in law. Apart from relying upon the order of the ld. CIT(A), he submitted that the deeming provision of Section 56(2)(viia) are invoked only when, firstly, the shares have been received without consideration; or secondly, shares have been received at a price less than the Fair Market Value. Here, in this case, the deeming provision are attracted only in respect of purchase of shares of 22 companies, because, admittedly the purchase was less than the Fair Market Value, therefore, the claim of the assessee to consider the negative figure of other 4 companies to arrive at aggregate Fair Market Value of all the 26 companies is not admissible. He further submitted that the word used in section is, a share of a company and Fair Market Value of such property. Thus, the intention of the Legislature is to consider the purchase consideration of a share of a company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore actual tax liability to the extent paid as TDS/TCS/Advance Tax] 2. Amount shown in the balance sheet as asset which does not represent the value of any asset including unamortized amount of deferred expenditure [Misc. expenditure and losses not written off] The asset which does not represent the value of any asset including unamortized amount of deferred expenditure [Misc. expenditure and losses not written off] are called fictitious assets in accounting terms. Fictitious assets as the name suggests, are not assets in a true sense. These generally include some onetime heavy expenses which are not considered as an expense only in the year in which they were incurred. Rather, these expenses are shown as expenses over few accounting years. If the entire amount of these expenses is considered as an expense in the year of occurrence, these expenses may result in a big loss in that particular year. So these expenses are spread out over a few years. For example, preliminary expenses. These are expenses incurred at the time of starting the business. If the entire amount of preliminary expenses is assigned to the first year only, it would result in a huge loss in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Loans Non-Current Assets Land and Building Plant and Machinery Current Liabilities Furniture Sundry Creditors B/P Investments Outstanding expenses Misc. Expenditure Discount on Issue if Shares Total Total The amount not written-off in the current accounting period is shown in the balance sheet. This is an example of fictitious asset. 9. Fictitious assets a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch adjustments in terms of Rule 11UA(1)(b). 13. On perusal of the claim of the adjustments against the value of assets, it appears that the assessee has made unsubstantiated claims. The AO can very well examine the claim of the assessee in respect of FMV of shares purchased. The assessee has claimed adjustment in the value of assets on following grounds- 1. Earnest money/advance against plots/land forfeited The CIT(A) has examined this issue in para 5.23 on page 20-21 of his order and has given the finding that the assessee has not submitted any documentary evidence to substantiate its claim. In the paper book of the assessee also, no supporting document is filed. The assessee is making claim of adjustment only on the basis of notes to balance sheet. Onus is on the assessee to substantiate that its claim falls under Rule 11UA and then it has to be established that the claim is genuine. The assessee has fail to discharge the onus. 2. Interest Cost incurred for purchase/development plots/land/projects The CIT(A) has examined the above claim in para 5.23 on page 21-23. And has given the finding that the claim is bereft of merit. 3. Bad debts The CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o-called assets whose value was shown as inflated as on 30.03.2015 was not shown so in the balance sheets of those companies as on 31.03.2015. Further, no such observations of the statutory auditors of the said companies are there in the audited financial accounts as on 31.03.2015. Therefore, the claim of the assessee is self-contradictory. The purpose of the assessed is to reduce the FMV of shares by claiming the lesser value of assets. Decision on Merits 32. We have heard the rival submissions and perused the relevant finding given in the impugned orders as well as material referred to before us at the time of hearing. So far as one of the main contentions raised by the ld. counsel that the deeming provision of section 56(2)(viia) would not apply on the facts of the present case as a transaction was between the same family/group companies and therefore, it cannot be deemed that it was case of money laundering of unaccounted money or colorable transaction. Here, in this case, it is a matter of fact that all the companies belonged to/owned by the same family having the registered office at the same place and owned by the same group. The deeming provision of Section 56(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such deeming provision will be triggered. No exception has been carved out (except for as provided in proviso that it shall not be applicable on certain kind of transfer) either looking to certain hardships or under certain circumstances where the provision will not apply. It is a well settled and trite law right from time memorial that the construction of the statute must be taken from the bare words of the Act. One should not look what possibly may have been the intention of the Legislature and aid the language of the statute. If the Legislature did intend anything but has not expressed clearly in the language of the statute, then also the Courts cannot invent something which do not matches with the words of the text. It is only where the language of the statute in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity or hardship or injustice, presumably not intended, then a construction may be put upon it which modifies the meaning of the words and even the structure of the sentence, then the Courts probably can go what was the purpose of bringing that legislation and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res of a company . The word aggregate fair market value refers to the said property only, i.e., the share of a company. It is only where the aggregate fair market value of shares of such company exceeds Rs.50,000/-, then same has to be taxed. The word aggregate used in the section refers to shares of a company and cannot lead to an inference that aggregate value of transaction of shares of various companies should be taken cumulatively for computing the FMV. This word has been used to see the aggregate value of the shares of a particular company and not to infer to aggregate or club all the transaction of transfer of shares of different companies. There is no such exception or provision where a transaction relating to purchase of shares of several companies are undertaken then the fair market value of shares of all the companies needs to be aggregated or any kind of set-off of positive and negative figure is to be given, i.e., where the FMV of a share is negative or FMV is lesser than the purchase value, then same is to be adjusted with transaction of shares of a company where FMV is positive. In case where purchase consideration is more than FMV, then clause (viia) is not be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,572/- and therefore, difference amount of Rs.10,56,92,728/- is to be corrected. In support he has given the company wise value of the shares as per the balance sheet taken by the Assessing Officer which gives the figures of assets and liabilities and has worked out the aggregate excess/short Fair Market Value. Accordingly, he submitted that the Ld. CIT (A) and Assessing Officer have wrongly made this addition instead of verifying and correcting the same. Since calculation error in the figures taken by the AO for the valuation has been pointed out as per the detail working submitted before, therefore, we find it fit that same needs to be verified by the AO. Accordingly, we direct the Assessing Officer to examine the calculation as submitted by the AO and correct the figures if any after verification and rectify the error and grant consequential relief. 37. Now coming to the last contention raised by the ld. counsel that the ld. Assessing Officer and Ld. CIT(A) have erred in law and on facts in not giving any deduction of various adjustment made by the auditors in the value of assets in his report/financial statements on the date of transfer, i.e., 30th March, 2018. Here in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been clarified by the ld. counsel that though for the purpose of accounting standard and disclosure requirement under the Companies Act, the figures of assets have been given in the balance sheet which may be similar to as on 30th March, 2015 and 31st March, 2015, however on the valuation date the balance sheet prepared contains detail notes to the accounts wherein auditors have clearly clarified and qualified certain items which does not represent the value of the assets. Most of these items broadly have been following: - (i) Borrowed interest on assets which has been capitalized as per the accounting standard and requirement of the Income Tax Act. (ii) Work in progress. (iii) Bad debts. (iv) Earnest money/advance forfeited against the plots. (v) Various materials which are though part of assets but have been damaged; and for certain payment in respect of EDC charges, statutory charges, licensing fee, etc. paid to the Government Authorities for acquiring the land. 38. Before us following details of assets of the companies which have been clarified by the auditors that they do not represent the real value of the assets have been prepared as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 Alankar Apartments Pvt. Ltd. Electrical material, tiles, marbles hardware etc. 3,58,22,688 Note No. 7 2,33,91,430 3,43,147 2,30,48,283 Borrowing cost included in tangible asset do not represent the value 5,63,59,323 9,21,82,011 5 Greenvalley Realtors Pvt. Ltd. Investment in LAND 76,64,000 Note No. 6 19,34,482 14,700 19,19,782 6 Prime Commercial Pvt. Ltd. Stock in Trade (Inventories)- Assets 25,91,80,200 Note No. 7 6,55,05,910 7,10,760 6,47,95,150 7 Ambience Homes Pvt. Ltd. Impairment in the value of investment in pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fee etc. paid for open area, parks, roads, amenities, facilities and services useable by the residents of the colony / complex is not claimed as a deduction. In the case of Ambience Developers Infrastructure Pvt. Ltd. it is shown in the balance sheet under the head business investment for the only reason that the project of said company is jointly with another company. In case of other 4 companies, since those are their independent projects, therefore, such expenses are shown in their balance-sheets as stock-in-trade. In the audited balance sheets of all the 5 companies as on the relevant date, the auditor, by way of a note has mentioned that the amounts to this extent do not represent the value of said assets. Ld. Assessing Officer and Ld. CIT(A) have rejected such claim of the assessee mainly on the ground that either the assessee has not been able to substantiate; and secondly, there is no provision in the statute/ rules to reduce the value of the asset as shown in the books. 39. One very important aspect which needs to be examined is, whether such kind of an adjustment is permissible under the rule 11UA while determining the fair market value of unquoted shares. The form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et has been defined. The manner in which the book value of the asset in the balance sheet has to be determined is given under the head A which has following limbs: - Firstly, the book value of the asset in the balance sheet is to be reduced by any amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income Tax Act; and Secondly, any amount shown in the balance sheet as asset which does not represent the value of any asset including unamortized amount of deferred expenditure. Ergo, if any amount is shown in the balance sheet which do not represent the value of the asset has to be reduced. 40. In the case of the real estate/construction companies, certain items like construction and development expenses, finance cost, advances made to the suppliers, contractors, unamortized amount of deferred expenditure, preliminary expenses and certain other items which due to method of accounting under accounting standard or under the Income Tax Act are capitalized but eventually are deferred for a period of time which either becomes part of the P L account or are written off. But til ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the balance sheet as per the mandate of Rule 11UA. Thus, we hold that principally the book value of the asset can be reduced by an amount which does not represent the value of the asset while determining the fair market value of the shares under Rule 11UA(2). 42. Now we will individually discuss the various adjustments which have been claimed by the assessee before the authorities below and also as qualified by the auditors in the notes to the account. First of all, assessee has claimed earnest money/advances against various plots forfeited by the authorities. The details of such non-recoverable forfeited amounts with respect to Ambience Pvt. Ltd. have already been incorporated above. The assessee s contention has been that the earnest money and advance was given to the Government Authorities for the purchase of plot /land in auction, however due to non fulfillment of terms and condition the earnest money paid by the company has been forfeited by the Government Authority. In support, the assessee has also filed a letter from NOIDA Authority wherein the authority has stated that the company has failed to deposit installment of Rs. 38.9 crore on stipulated time, therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ambience Developers Infrastructure Pvt. Ltd. 52,37,48,009/- Ambience Towers Pvt. Ltd. 38,63,12,000/- Tropical Infradevelopers Pvt. Ltd. 97,52,270/- Alankar Apartments Pvt. Ltd. 5,63,59,323/- Total 184,44,75,399/- Ld. CIT (A) has rejected the said contention on the ground that the provision of Rule 11UA talks about the Fair Market Value of the asset and not property or immovable assets and the FMV of the share is determined taking into consideration book value of the asset and the book value of the liabilities. Another contention of the Revenue is that, as per provision of Section 36(1)(iii) interest cost on any business asset is to be capitalized till the date asset is put to use and have also referred to provision of Section 43(1) read with Explanation 8 that the interest relatable to the period after such asset is first put to use same shall not be included in actual cost of the asset. However, nowhere the Assessing Officer was Ld. CIT (A) has found that these assets have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of determining the book value so as to determine the Fair Market Value of shares. 44. In so far as the claim of bad debts is concerned of Rs.4,08,45,945/- in the case of M/s. Ambience Developers and Infrastructure Pvt. Ltd. the same has been stated to be old outstanding rent which had already become debts which had been reduced from the value of the asset by the auditors treating that debtors of that amount are not recoverable as on date. This outstanding rent is pending from last many years even though they have not claimed that as bad debt in the P L account by writing it off in the books of account. Even if the company has not written off the bad debt, but auditors have found that it is not recoverable for many years and have reduced from the value of asset, then same cannot be held to represent the value of the asset on the date of valuation, Simply because the amount has not been written off as on 31st March, 2015, it does not mean it is to treated as part of value of asset. Accordingly, Assessing Officer is directed to reduce the said amount from the value of the asset while valuing the book value of asset.. 45. Coming to the electrical material, tiles, marbles and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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