Share premium valuation under Rule 11UA must not be rejected without defects in the assessee's report.

An addition under section 56(2)(viib) for share premium was challenged on the basis that the assessee had supported the issue price with a chartered accountant's valuation report under Rule 11UA(1)(c). The Assessing Officer substituted his own valuation without identifying any defect in the report or any factual basis to disregard it. The note records that a duly supported valuation report carries persuasive value and cannot be replaced merely because the Assessing Officer prefers a different method. On those facts, the assessee's valuation was treated as the proper basis for share valuation and the addition was held unsustainable.

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Issues: Whether the addition made under section 56(2)(viib) on account of share premium was sustainable when the assessee had filed a chartered accountant's valuation report under Rule 11UA(1)(c) and the Assessing Officer had substituted his own valuation without pointing out any defect in the report.

Analysis: The assessee had furnished a detailed valuation report for the equity shares. The Assessing Officer did not identify any defect in that report and instead replaced it with his own valuation merely because he was not satisfied with the assessee's method. The valuation report had persuasive value and there was no material to discard it on facts. The assessee's valuation was therefore accepted as the proper basis for determining the share value.

Conclusion: The addition was not sustainable and the assessee's valuation was upheld, resulting in dismissal of the Revenue's challenge.

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