TMI Blog2024 (2) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee has also supported the premium determined on issue of shares by DCF Method. Thus, the premium charged is supportable by the valuation report and the premium has been charged to existing shareholder. Thus effectively, the benefit if any arising to the company in turn benefits to the subscriber having pre-existing right in the company. While applying Section 56(2)(viib), the purpose for which deeming provision has been inserted is not achieved in the instant case. Hence, in our view, the conclusion drawn by the CIT(A) cannot be faulted either on facts or in law. Appeal of the Revenue is dismissed. - Kul Bharat, Judicial Member And Shri Pradip Kumar Kedia, Accountant Member For the Appellant : Shri Pawan Chakrapani, FCA For the Respondent : Shri Vivek Kumar Upadhyay, Sr.DR ORDER PER PRADIP KUMAR KEDIA-A.M. : The captioned appeal has been filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-III, New Delhi ( CIT(A) in short) dated 22.08.2019 arising from the assessment order dated 28.12.2017 passed by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2015-16. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a premium of Rs. 4,435.76/-per share. The company has adopted the DCF method to arrive at the fair market value of the shares to be issued for allotment of shares at Premium. It is further submitted that the shares were allotted by the appellant to its holding company which was holding 91% of the shares prior to this allotment. It is also submitted by the AR that prior to this issue, the balance 9% shares were held by one Mr. Sharad Maheshwari and the holding company M/s. Sun Edison Solar Power India Pvt. Ltd has bought these 9% shares also from Mr. Sharad Maheshwari @ Rs. 4444.44 per share which includes a premium of Rs. 4434.44 per share. In view of this, it has been contended that the issue of fresh shares @ Rs. 4445.76 (including premium of Rs. 4435.76 per share) to the holding company is at the fair market value of the shares. The AR has also contended that there is no doubt about the genuineness of the transactions. It-is further submitted that the statute provides option to the appellant to value the shares by using DCF method or based on the net worth as per Rule 11UA(2) and the appellant has duly got the shares valued from the valuer by using DCF method. It is contended th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that it cannot be said that there was no reasonable basis for the projections made in the valuation report. In this regard, reference is also made to the decision of Hon'ble ITAT, Jaipur Bench in case of M/s. Rameshwaram Strong Glass (P) Ltd. V/s ITO, in which it has been held that when the law has specifically provided a method of valuation and the assessee exercised an option by choosing a particular method, changing the method or adopting a different method would be beyond the powers of the revenue authorities. It is further held that the DCF Method is essentially based on the projections (estimations) and hence these projections cannot be compared with the actuals to expect the same figures as were projected. 5.3.2 Further, reference is made to the decision of Hon'ble Delhi ITAT in the case of Stryton Exim India P. Ltd, vs ITO, in ITA No. 5982/Del/2018 in which vide order dated 23 October, 2018, it has been held that- The learned assessing officer as well as the learned commissioner appeals rejected the valuation report submitted by the assessee for the sole reason that projections shown by the assessee in the project report of the cash flow did not mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he valuer cannot be expected to determine the exact value as the same is not feasible. As already discussed above, the valuer has adopted reasonable projections than the optimum figures for generation of revenue and the valuation of shares done by the valuer has got reasonable basis. Moreover, as argued by the AR, there is no excess premium charged because the holding company has during the year purchased 1350 equity shares of the appellant company from Sh. Sharad Maheshwari at almost the same price of Rs. 4444.44 per share which shows the fair market value of the shares. In view of these facts, the addition made by the AO is deleted and the grounds of appeal are allowed. 6. Ground no.5 of the appeal is related to the claim of unabsorbed depreciation pertaining to earlier years to be set off against the assessed income. Ground no. 6 of the appeal is related to the claim of MAT credit pertaining to AY 2013-14 to be adjusted against the tax liability. In this regard, the AR has also submitted that the appellant has filed a rectification application before the AO in respect of these claims and the same has not been disposed by the AO. In this regard, the AO is directed to verify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of shares to holding company at a premium has been examined by the Co-ordinate Bench of Tribunal in the case of BLP Vayu (Projects-I) Pvt. Ltd. reported in (2023) 151 taxmann.com 47 (Del-Trib.). The relevant operative paragraph of the order of the Tribunal is hereunder: 11.1 As per case records, it is an undisputed fact that the shares have been allotted at a premium to its 100% holding company. Thus, applicability of Section on 56(2)(viib) has to be seen in this perspective. The Co-ordinate Bench of Tribunal in DCIT vs. Ozone India Ltd. in ITA No.2081/Ahd/2018 order dated 13.04.2021 in the context of Section 56(2)(viib) has analyzed the deeming provisions of Section 56(2)(viib) of the Act threadbare and inter alia observed that the deeming clause requires to be given a schematic interpretation. The transaction of allotment of shares at a premium in the instant case is between holding company and it is subsidiary company and thus when seen holistically, there is no benefit derived by the assessee by issue of shares at certain premium notwithstanding that the share premium exceeds a fair market value in a given case. Instinctively, it is a transaction between the self, if so ..... X X X X Extracts X X X X X X X X Extracts X X X X
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