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Issues: Whether, for the purposes of section 50CA, the fair market value of unquoted equity shares could be determined on the basis of a Chartered Accountant's valuation report under Rule 11UA(1)(c)(b), and whether the Assessing Officer could substitute the declared sale consideration by applying the higher price at which fresh shares were issued to the same buyer.
Analysis: Section 50CA deems the fair market value of shares of a company other than a quoted share, as determined in the prescribed manner, to be the full value of consideration for capital gains purposes. Rule 11UAA directs that such fair market value be determined in the manner provided in Rule 11UA(1)(c)(b) or (c), as applicable. The Tribunal noted that Rule 11UA(2), which refers to valuation for section 56(2)(viib), was not the applicable provision for a transfer by an assessee under section 50CA. It further held that under the applicable rule, a valuation report from a Chartered Accountant could be relied upon and the net asset value method was the relevant method. The Tribunal also found no material to show that any extra or hidden consideration had passed to the assessee, and the higher price at which fresh shares were issued to the same buyer could not, by itself, replace the declared transfer value in the absence of a statutory basis.
Conclusion: The Chartered Accountant's valuation report was valid for section 50CA purposes, the Assessing Officer was not entitled to substitute the declared consideration with the higher issuance price, and the addition was rightly deleted.
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