Rule 11UA valuation must follow the method applicable for the year; retrospective application of the amended method was rejected.

For the relevant assessment year, Rule 11UA required valuation of unquoted equity shares on the book-value method reflected in the balance sheet, and the amended valuation method effective from 01.04.2018 could not be applied retrospectively. The addition under section 56(2)(vii)(c) was also unsupported because the Assessing Officer valued the underlying shares of the ultimate investee company instead of applying the prescribed formula to the shares actually transferred. On these facts, the appellate deletion of the addition was affirmed in favour of the assessee.

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Issues: Whether the addition under section 56(2)(vii)(c) was sustainable on the footing that the assessee indirectly acquired shares below fair market value, and whether Rule 11UA for the relevant assessment year required valuation of the underlying shares on book value rather than under the amended method.

Analysis: The Tribunal followed its coordinate-bench decision on identical facts and held that, for the assessment year under consideration, Rule 11UA required valuation of unquoted equity shares on the basis of book value as reflected in the balance sheet. The amended method applicable from 01.04.2018 could not be applied retrospectively. The addition was also found unsustainable because the Assessing Officer had proceeded by valuing the underlying shares of the ultimate investee company instead of applying the prescribed formula to the shares actually transferred. On the facts, the deletion made by the appellate authority was found to be in accordance with the governing rule and the earlier coordinate-bench view.

Conclusion: The addition under section 56(2)(vii)(c) was not justified and the deletion was affirmed in favour of the assessee.

Final Conclusion: The revenue's challenge failed, and the appellate order deleting the addition was sustained.

Ratio Decidendi: For the relevant assessment year, valuation under Rule 11UA had to be made in the manner prescribed for that year, and the amended valuation method could not be applied retrospectively to sustain an addition under section 56(2)(vii)(c).

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