TMI Blog2024 (2) TMI 535X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. Besides, there is no requirement in law to furnish valuation report from independent valuer for the purposes of determination of valuation under Rule 11UA(a) of the Rules. We observe that the book value of assets and liabilities adopted for the purposes of NAV method of valuation is in consonance with last audited balance-sheet items as on 31.03.2016 whereas the allotment has been stated to be made in November, 2016 during the Financial Year 2016-17 relevant to Assessment Year 2017-18. AO misdirected himself in law on seeking valuation report which requirement do not emanate from the law codified in this regard. The phraseology of clause (a) to sub-rule (2) of Rule 11UA read with Explanation (a) to Section 56(2)(viib) do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment for Assessment Year 2017-18 in question, the Assessing Officer observed that the assessee has issued Rs. 10 lakh equity shares of face value Rs. 10/- per share at Rs. 36 per share, i.e, at a premium of Rs. 26 per share. The shares were subscribed by the directors of the company, namely, Shri Vinod Sachdeva and Shri Nalin Sachdeva in equal portion of 5 lakh shares each. In view of the absence of valuation report of Chartered Accountant in terms of Rule 11UA, the AO invoked the provisions of Section 56(2)(viib) and considered the premium amount of Rs. 26 per share to be in excess of Fair Market Value (FMV) of equity shares of the company and consequently the excess consideration received on account of share premium on issue of equity s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al alongwith premium from its directors Sh Vinod Sachdeva and Sh Nalin Sachdeva. Share capital has been subscribed by two directors @ Rs 36 per share including premium of Rs 26 per share. The fair market value of unquoted equity shares for the purposes of subclause (i) 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) the fair market value of unquoted equity shares = (A-L) (PV), (PE) Where, A = book value of the assets in the balance-sheet as reduced by any amount of tax paid as deduction or collection at s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... = the paid up value of such equity shares; 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.] Appellant has option of adopting different methods of valuation of share price as prescribed in section 56(2)(viib) as reproduced above. The assessee has determined the valuation of shares as method (a) and rightly exercised it. The certificate under rule 11UA is required only when valuation is done as per Discounted Free Cash flow method. Ao has not rejected the valuation done based on figures of balance sheet which is audited and certified by CA. The method adopted by assessee has been prescribed under the IT Act and upheld by va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low (DCF) Method as provided in Rule 11UA(2)(b) of the Rules. The ld. counsel submits that since FMV has been determined on the basis of book value of assets and liabilities, the assessee was not required in law to obtain separate valuation report. The fair market value as per Rule 11UA(2)(a) can be easily vouched from the financial data available in the audited balance-sheet of the assessee-company as placed in the paper book. The ld. counsel thus submitted that CIT(A) has rightly taken cognizance of the factual and legal position and reversed the arbitrary and unjustified additions made by the AO. The ld. counsel thus submitted that no interference with the order of the CIT(A) is called for. 8. We have heard the parties in length and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Year 2017-18. The AO misdirected himself in law on seeking valuation report which requirement do not emanate from the law codified in this regard. The phraseology of clause (a) to sub-rule (2) of Rule 11UA read with Explanation (a) to Section 56(2)(viib) do not thrust the requirement of Valuation Report for substantiation of valuation under NAV method. 10. We thus see that the conclusion of facts arrived at by the CIT(A) and the primary facts on which such conclusion is based bears a direct nexus. The CIT(A), in our view, has applied its mind to the relevant consideration while determining the issue. The audited balance-sheet testifies the FMV. We thus see no perceptible reason to deviate from the findings of the CIT(A). 11. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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