TMI Blog2023 (7) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned order is not coming under same factual matrix of the case Agro Portfolio Private Ltd [ 2018 (5) TMI 1088 - ITAT DELHI] - AO was not able to establish about any dispute about the correctness of data as supplied by the assessee to merchant banker. The ld. AO had not taken any technical support related to valuation of the share of assessee in impugned assessment year. The data in valuation is basis of projection which was calculated by the Merchant Banker/ Chartered Accountant. The change of method of valuation is not in accordance with the relevant provisions of the Act and the Rules stated above. Accordingly, we uphold the findings of the ld. CIT(A) and set aside the addition made by the ld. AO. Accordingly, grounds taken by the revenue in this respect are dismissed. - I.T.A. No. 407/Asr/2019 - - - Dated:- 7-7-2023 - Dr. M. L. Meena, Accountant Member And Sh. Anikesh Banerjee, Judicial Member For the Appellant : Sh. Sudhir Sehgal, Adv. For the Respondent : Sh. S. R. Kaushik,CIT.DR ORDER PER : ANIKESH BANERJEE, JM: The instant appeal of the revenue was filed against the order of the ld. Commissioner of Income Tax (Appeals), Bathinda,[in brev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Addition on account of interest on TDS Rs. 2,38,149/- Disallowance of depreciation claimed on trucks in excess of 15% Rs. 5,28,924/- Assessed Income Rs. 95,43,140/- The ld. AO doubted the issue of shares (7,71,309 in number) @ Rs. 147.80/- per share including the premium @ Rs. 137.80/-.The assessee duly explained that the shares have been issued as per the calculations of share value which has been calculated duly as per the method prescribed under 11UA of the Income Tax Rules, 1962 (in brevity the Rule).As per the assessee, the report for the valuation of shares as per Discounted Cash Flow (in brevity DCF) method duly signed by the Chartered Accountant was rejected by the ld. AO without giving any valid base. 3.1. The ld. AO opted the different method of calculation of share in the Fair Market Value (in brevity the FMV)and calculated value per share @ Rs. 103.90 per share i.e., Rs. 10/- face value and premium of Rs. 93.90/-. The addition was thus made by the AO @ (147.80 103.90 i.e., Rs. 43.90 per share). Total addition of Rs. 3,38,60,465/- which works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R argued that at the outset, it is submitted that the matter has been decided in the favour of the assessee by the ld. CIT(A) after duly considering all the submissions and documents filed by the assessee during appellate proceedings. It has been clearly stated in paragraph 5.2.7 at Page No. 14 of the appeal order mentioned above. The ld. AO was neither justified in changing the method of valuation not was authorized to replace the figures of actual is in the projected figures to arrive at the aforesaid addition and thus the same is deleted. 4.2. The ld. AR argued that the assessee had issued the shares @ Rs. 147.80/- per share which includes Rs. 137.80 as share premium. The assessee during the course of assessment proceedings has duly submitted the report as made by the Chartered Accountant as per DCFmethod, annexed in APB page No.58 to 61 . The DCF method is an approved method as per rule 11UA of Rule. It is submitted that the Explanation to S. 56(2)(viib) of the Act provides that the FMV of unquoted equity shares for the purpose of S. 56(2)(viib) of the Act shall be the value as determined in accordance with such method as may be prescribed. The prescribed methods of valuati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of clause (a) of Explanation to clause (viib) of sub-section (2) of section 56 shall be the value, on the valuation date, of such unquoted equity shares as determined in the following manner under clause (a) or clause (b), at the option of the assessee, namely: (a) .. or (b) The fair market value of the unquoted equity shares determined by a merchant banker or an accountant as per the Discounted Free Cash Flow method 5. The ld. AR respectfully relied on catena of case law in this regard wherein similar view has been taken: a) Principal Commissioner of Income Tax vs. Cinestaan Entertainment (P) Ltd. (Delhi HC) (2021) 199 DTR 345 The Assessee has adopted DCF method to value its shares and Revenue is unable to demonstrate the methodology adopted by the assessee is not correct; AO has simply rejected the valuation of the assessee on the ground that the performance did not match projections and failed to provide any alternate fait value of shares; Tribunal was therefore justified in deleting the addition made under section 56(2)(viib). b) Rameshwaram Strong Glass P Ltd. Vs ITO in ITA No. 172 ITD 571 (Jaipur Bench) dated 12.07.2018 If a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) which has been reproduced at Page No. 6 of Appellate Order. It is very much clear from the working reproduced that the valuation as per NAV comes out to be much higher than the value adopted by the assessee as per DCF method. 6.2. The ld. AR further argued and placed the for the sake of brevity of the matter, the valuation of shares as per NAV method basis the actual figures as appearing in the Financial Statements of every year which are placed at APB page No. 21 to 55 . The tabulated format of data is reproduced as hereunder: Particulars AY 2016-17 AY 2017-18 AY 2018-19 Share Capital 2,26,96,400.00 2,26,96,400.00 2,26,96,400.00 Reserves and Surplus 29,91,96,866.00 35,84,01,874.00 39,30,16,330.00 Net Assets 32,18,93,266.00 38,10,98,274.00 41,57,12,730.00 No. of Shares 2269640 shares 2269640 shares 2269640 shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 147.80/-. Thus, excess consideration received by the company over and above the fair market value per share comes out to Rs. 43.90/-. The total number shares allotted are 7,71,309. Thus, the assessee has received excess consideration of Rs. 3,38,60,465/- (Rs. 147.80-Rs.103.90 = Rs. 43.90 X 771309 = Rs. 3,38,60,465/-) over and above the fair market value of the shares. This amount of Rs. 3,38,60,465/- is taxable as per the provisions of section 56(2)(viib) of the Income Tax Act, 1961. Accordingly, the amount of Rs. 3,38,60,465/- is added back to the returned income of the assessee. I am satisfied that the assessee has furnished inaccurate particulars of income. Penalty proceedings u/s 271(l)(c) for furnishing inaccurate particulars of the Income Tax Act, 1961 are being initiated separately. [Add:-Rs. 3,38,60,465/-] 7.1. The ld. DR further relied on the order of the ITAT Delhi Bench in the case of Agro Portfolio Private Ltd. vs. ITO in ITA No. 2189/Del/2018 date of order 16.05.2018/ 94 taxmann.com 112 (Del-Trib) . The relevant para 15 to 17 are duly reproduced as below: 15. In these circumstances, we are unable to accept the contentions of the assessee that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same, we dismissed the appeal as devoid of merits. 17. In the result, the appeal of the assessee is dismissed. 8. We heard the rival submission and relied on the documents available in the record. The assessee has obtained the method for DCF for as calculating the FMV of share. In assessment order without finding any lacuna, the ld. AO has changed the method from DCF to NAV. The ld. AO has only grievance that the data taken on basis of the EBDIT was not proper due to mismatch of data. The ld. AO had opted the NAV. The law has specifically conferred an option upon the assessee that for the purpose of S. 56(2)(viib) of the Act an assessee can adopt any of the methods mentioned u/r 11UA(2) of the Rules. From Rule 11UA, it is clear that either the NAV (Clause a') or DCF Method (Clause b') can be applied for the purpose of section 56(2)(viib) Expl. a(i) of the Act, at the option of the assessee. In the present case, it is not denied that the assessee adopted clause (b) of Rule 11UA(2) of the Rules and accordingly obtained a Valuation Report from a Chartered Accountant. Since the law has prescribed the specific method for valuation i.e DCF so the assessee was free ..... X X X X Extracts X X X X X X X X Extracts X X X X
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