Share premium valuation under DCF method upheld where Rule 11UA permits assessee's option and no infirmity in report was shown.

Section 56(2)(viib) addition on share premium was deleted where the assessee substantiated fair market value through the discounted cash flow method under Rule 11UA(2). The Tribunal held that the rule permits valuation either under the prescribed formula or by DCF at the assessee's option, and that the Assessing Officer could not reject the report merely because it was not prepared by a merchant banker. The High Court found no substantial question of law in that reasoning and upheld the deletion of the addition.

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Issues: Whether the Tribunal erred in deleting the addition made on account of share premium under section 56(2)(viib) by accepting the assessee's valuation under the discounted cash flow method.

Analysis: The Tribunal accepted that Rule 11UA(2) permits determination of fair market value either under the prescribed formula or by the discounted cash flow method at the assessee's option. It found no infirmity in the valuation report and held that the Assessing Officer had no basis to reject the method merely because it was not prepared by a merchant banker. The High Court found no substantial question of law arising from that conclusion.

Conclusion: The deletion of the addition under section 56(2)(viib) was upheld and the Revenue's challenge failed.

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