TMI Blog2023 (6) TMI 426X X X X Extracts X X X X X X X X Extracts X X X X ..... e satisfaction exercised at his discretion, but a subjective satisfaction based on the facts of the case. The lower authorities have not examined the basis on which the valuation is done and from the perusal of facts, no details in this regard have been called for by the lower authorities. The valuation report is rejected based on the objective satisfaction and not based on detailed examination. As respectfully following case of Town Essential Private Limited Ltd. [ 2021 (7) TMI 17 - ITAT BANGALORE] we hold that the valuation done by the assessee cannot be rejected without recording any finding to the contrary by the lower authorities and therefore we delete the addition made in this regard. Disallowance u/s. 40(a)(i)/(ia) - tax deduction u/s. 194J should have been made on the payments of Management Fees,Outsourcing Expenses and License Fees - AR submitted that the details and evidence with regard to applicability of TDS provisions are already submitted before the lower authorities which have not been examined and payees have included these payments as their income and paid taxes on the same - HELD THAT:- We are of the view that the issue needs to be verified factually bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al before the Tribunal against the order of the CIT(Appeals). 5. There is a delay of 355 days i.e., 293 days upto the date of pre- Covid-19 pandemic and 62 days during the Covid-19 period. The assessee filed an affidavit with the reasons for the delay and prayed for condonation of delay. The relevant extract of the same is as follows:- 3. In this regard, the Appellant humbly submits that the entire finance team was headed by one Mr. Ravindran Kolliakal, who was the Group Chief Financial Officer as well as the director in the Appellant Company from 18/07/2013. The said Director and CFO Mr. Ravindran Kolliakal was looking after and coordinating the first appeal proceedings and handling other appellate work of the Appellant Company. 4 The Appellant submits that during the month of March, 2019, Mr. Ravindran Kolliakal was forced to resign from his role in the Appellant Company due to certain diverse reasons and the fact of the first appellate order being passed by the learned Commissioner of Income Tax [Appeals]-7, Bengaluru for the impugned assessment year was not brought to the attention of the group chairman or any other staff of the Appellant Company by the said person. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of penalty proceedings on 18.3.2020 and filed the appeal based on professional advice. In our considered view, the reason given by the assessee is a reasonable cause and we therefore condone the delay and consider the appeal for adjudication. Valuation of shares 8. The AO during the course of assessment noticed that the assessee has received share premium on allotment of shares to the tune of Rs.33,71,77,500 and called for the details of the same. The assessee submitted the break-up of the shares allotted as follows:- Parties to whom share allotted No. of shares Face Value of Share Value of Premium/Share M/s.UKN Properties Pvt Ltd 13,00,000 Rs.10 Rs.165 Ivils Ksherna Geo Holdings Pvt Ltd 6,33,000 Rs.10 Rs.165 Mr. Gautam Nambisan 65,000 Rs.10 Rs.165 M/s Glow Crane Project 45,500 Rs.10 Rs.165 9. The AO in his order state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the assessee has not employed any scientific method for determining the valuation of shares and the valuation is done solely with an intention to arrive at the higher value of issue of shares at the premium. In this regard, the CIT(A) relied on the order of the Kerala High Court in the case of Sunrise Academy of Medical Specialties India P. Ltd., 96 taxmann.com 43. Aggrieved, the assessee is in appeal before the Tribunal. 13. Before us, the ld. AR submitted that the AO has relied on a statement recorded during the survey proceedings of UKN Properties Pvt Ltd., but never shared the copy of the statement to the assessee in order to file any rebuttal. The ld AR also submitted that DCF method of valuation is one of the recognized methods of valuation for arriving at the value of shares and the assessing authorities cannot reject the method without undertaking the exercising of examining the methodology employed by the assessee. The ld AR further submitted that the provisions of section 56(2)(viib) cannot be invoked by the revenue authorities without recording any finding as to how the method of valuation employed by the assessee is not correct. It was also submitted that it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be followed when such method of valuation is not accepted by the AO we notice that the ITAT, Bangalore Bench in the case of VBHC Value Homes Pvt. Ltd., Vs ITO in ITA No.2541/Bang/2019 order dated 12-06-2020, after relying on the decision of the Hon ble Bombay High Court in the case of Vodafone MPesa Ltd Vs Pr.CIT 164 DTR 257 and decision of the ITAT, Bangalore Bench in the case of Innoviti Payment Solutions Pvt. Ltd., Vs ITO(2019) 102 Taxmann.com 59 held as follows:- 9. We have considered the rival submissions. First of all, we reproduce paras 11 to 14 from the Tribunal order cited by learned AR of the assessee having been rendered in the case of Innoviti Payment Solutions Pvt. Ltd., Vs. ITO (supra). These paras are as follows: 11. As per various tribunal orders cited by the learned AR of the assessee, it was held that as per Rule 11UA (2), the assessee can opt for DCF method and if the assessee has so opted for DCF method, the AO cannot discard the same and adopt other method i.e. NAV method of valuing shares. In the case of M/s. Rameshwaram Strong Glass (P) Ltd. vs. The ITO (Supra), the tribunal has reproduced relevant portion of another tribunal order rendered in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court, it was held that the AO can scrutinize the valuation report and he can determine a fresh valuation either by himself or by calling a final determination from an independent valuer to confront the assessee. But the basis has to be DCF method and he cannot change the method of valuation which has been opted by the assessee. Hence, in our considered opinion, in the present case, when the guidance of Hon'ble Bombay high Court is available, we should follow this judgment of Hon'ble Bombay High Court in preference to various tribunal orders cited by both sides and therefore, we are not required to examine and consider these tribunal orders. Respectfully following this judgment of Hon'ble Bombay High Court, we set aside the order of CIT (A) and restore the matter to AO for a fresh decision in the light of this judgment of Hon'ble Bombay High Court. The AO should scrutinize the valuation report and he should determine a fresh valuation either by himself or by calling a final determination from an independent valuer and confront the same to the assessee. But the basis has to be DCF method and he cannot ITA No. 2541/Bang/2019 ITA No. 37/Bang/2020 S. P. Nos. 29 and 59/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y norm if any and/or Scientific Data, Scientific Method, scientific study and applicable Guidelines regarding DCF Method of Valuation. 10. From the paras reproduced above, it is seen that in this case, the Tribunal has followed the judgment of Hon'ble Bombay High Court rendered in the case of Vodafone M-Pesa Ltd., Vs. Pr. CIT (supra). The Tribunal has noted that as per the judgment of Hon'ble Bombay High Court, it was held that AO can scrutinize the valuation report and he can determine a fresh valuation either by himself or by calling a determination from an independent valuer to confront the assessee but the basis has to be DCF method and he cannot change the method of valuation which has been opted by the assessee. The Tribunal has followed the judgment of Hon'ble Bombay High Court and disregarded various other Tribunal orders against the assessee which were available at that point of time. In the present case also, we prefer to follow the judgment of Hon'ble Bombay High Court rendered in the case of Vodafone M-Pesa Ltd., Vs. Pr. CIT (supra) in preference to the judgment of the Hon'ble Kerala High Court cited by DR of the Revenue rendered in the case of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue as per the above two methods i.e., either DCF method or fair market value of the unquoted equity shares determined by a merchant banker. The choice of method is that of the Assessee. The Tribunal has followed the judgment of Hon'ble Bombay High Court rendered in the case of Vodafone M-Pesa Ltd., Vs. Pr. CIT (supra) and has taken the view that the AO can scrutinize the valuation report and he can determine a fresh valuation either by himself or by calling a determination from an independent valuer to confront the Assessee but the basis has to be DCF method and he cannot change the method of valuation which has been opted by the Assessee. The decision of ITAT, Delhi in the case of Agro Portfolio Ltd. 171 ITD 74 and the decision of the Bangalore Bench in the case of TUF Rheinland NIFE Academy Pvt.Ltd. (TS-92-ITAT- 2019(Bang)has also been considered by the ITAT, Bangalore in the case of VBHC Value Homes Pvt. Ltd.(supra). 11. In view of the above legal position, we are of view that the issue with regard to valuation has to be decided afresh by the AO on the lines indicated in the decision of ITAT, Bangalore in the case of VBHC Value Homes Pvt. Ltd., Vs ITO (supra) i.e., (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer authorities have not examined the basis on which the valuation is done and from the perusal of facts, no details in this regard have been called for by the lower authorities. The valuation report is rejected based on the objective satisfaction and not based on detailed examination. 19. In view of the above discussion and respectfully following the decision of the Tribunal in the case of Town Essential Private Limited Ltd. (supra), we hold that the valuation done by the assessee cannot be rejected without recording any finding to the contrary by the lower authorities and therefore we delete the addition made in this regard. Disallowance u/s. 40(a)(i)/(ia) 20. During the course of hearing, the AO noticed that the assessee has made certain payments without deducting tax at source as listed below:- Particulars Amount (Rs.) Management Fees 48,45,276 Outsourcing Expenses 5,68,544 License Fees 4,51,424 Total 58,65,244 21. The AO made a disallowance u/s. 40(a)(ia) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the nature of statutory payment and does not come under purview of TDS. However. on the basis of details filed, the AR explained that these payments are on account of payment for Liquor license and the amount has been paid to the person who is the license holder for Liquor. Thus, the payment amount cannot be said to be license fee for the assessee company. Therefore, the payment will attract due TDS. Hence, the disallowance by the AO is found to be in order. 22. Before us, the ld. AR submitted that the details and evidence with regard to applicability of TDS provisions are already submitted before the lower authorities which have not been examined by them. He further submitted that the payees have included these payments as their income and paid taxes on the same and therefore there is no loss of revenue. He therefore prayed that the issue may be remitted back to the AO to examine the details and evidence furnished by the assessee and also to give opportunity to submit Form 26AS to substantiate that the payees have included the impugned payments as their income and paid taxes on the same. 23. The ld. DR did not have any objection for the issue to go back to the AO. 24. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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