Share premium valuation under section 56(2)(viib) sustained where projected cash-flow and indexed land valuation were rejected.

Section 56(2)(viib) applied to share premium received on issue of shares where the assessee's higher valuations were not substantiated. The lower appellate authority accepted only the book value-based valuation at Rs.95.18 per share and rejected the discounted cash flow valuation because it depended on projected profits without a solid basis, while the land component in the higher book value valuation at Rs.122.64 per share was indexed contrary to the prescribed method. As no material was produced to dislodge those findings, the addition under section 56(2)(viib) was sustained and the assessee's challenge failed.

---

---

Issues: Whether the addition made under section 56(2)(viib) of the Income-tax Act, 1961, on account of excess share premium was liable to be deleted by accepting the assessee's valuation of shares.

Analysis: The assessee had issued shares at a premium and supported the valuation by different methods, including discounted cash flow and book value. The lower appellate authority accepted only the book value-based valuation at Rs.95.18 per share and rejected the higher valuations, finding that the discounted cash flow valuation rested on projected profits without solid basis and that the land component in the book value valuation at Rs.122.64 per share had been indexed contrary to the prescribed method. No material was produced to dislodge those findings.

Conclusion: The addition sustained under section 56(2)(viib) to the extent of Rs.12,98,550/- was upheld and the assessee's challenge failed.

---