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of <h1>No Coercive Action on Start-Up Valuation Disputes Under Section 56(2)(viib) of Income Tax Act</h1> Section 56(2)(viib) of the Income-tax Act addresses taxation on the excess amount received by closely held companies over the fair market value (FMV) of unquoted equity shares. Valuation methods include reports by merchant bankers or accountants using the Discounted Free Cash Flow Method. The tax authorities have recently challenged such valuations in start-up companies, leading to additions under the said section. The Board directs that for start-ups as defined by the relevant government notification, no coercive action shall be taken to recover demands arising from reassessed valuations if the original valuation was rejected or modified by the Assessing Officer. Pending appeals should be expedited and disposed of preferably by March 31, 2018, to avoid undue hardship to start-ups raising genuine investments based on their business ideas.
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