TaxTMI 
TaxTMI 
2019 (1) TMI 104
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....ely on suspicion, surmise and conjecture and also the value of Rs. 400 "- equity share therein inclusive of premium amount of Rs. 390/- share. 3. The CIT (A) erred in upholding the arbitrary adoption of value of shares at Rs. 100/- share as on 31.03.2012 by the AO as against the value of Rs. 400/- share as on 31.03.2014 as per Appellant's valuation. 4. The CIT (A) failed to appreciate that the consideration received for the shares equaled the fair market value of shares and no excess over the fair market value was received. 5. The CIT (A) failed to appreciate that the Act allowed the Appellant to adopt any method either the prescribed method as per sub-clause (i) to clause (a) to Explanation under clause (viib) of sub-section 2 to Section 56 of the Act or any other method as per sub-clause (ii) to clause (a) of the above said Explanation, when he upheld AO's resort to determination of value of shares as per Rule 11UA of the Incometax Rules, 1962. 6. The CIT (A) erred in upholding the disallowance of expenditure titled R&D expenditure though the said expenditure was incurred for new product development of the existing business of the Appel....
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....le 11UA(2)(a) without any sanction of law, without appreciating that the provisions of Section 56(2) (viib) formed a deeming fiction enactedto curb transactions in shares using unaccounted money, by unconnected 3rd parties and that the said provisions do not apply to genuine transactions of close relatives of closely held companies. 2. The learned CIT(A) erred in sustaining the order of the AO which determined the share premium at Rs. 90/- per share following the valuation method provided under Rule 11UA(2)(a) as against the value of premium at Rs. 390/- per share computed by the Appellant following the method as prescribed in Rule 11UA(2)(b) read with technical guide on share valuation issued by Research Committee of the Institute of Chartered Accountants of India. 3. The learned CIT(A) failed to appreciate that there was no discretion available to adopt NAV method by applying Rule 11UA(2)(a) rejecting the method of share valuation adopted by the Appellant as prescribed under Rule 11UA(2)(b) of the Income-tax Rules, 1962. 4. The learned CIT(A) failed to appreciate that the determination of fair market value by an accountant who has signed the report unde....
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....ct, 1949 (38 of 1949) who is not appointed by the company as an auditor under section 44AB of the Act or under section 224 of the Companies Act, 1956 (1 of 1956):" He submitted that because of this, the valuation report submitted by the assessee has to be ignored because the same is not as per Rule 11UA and therefore, the action of the AO in determining the fair market value on the basis of NAV should be upheld. In reply, the ld. AR of assessee submitted that the valuation report available on pages 38 to 54 of paper book dated 02.02.2012 relating to value of the shares of the appellant as on 31.03.2012 is signed by a different Chartered Accountant i.e. Manohar S Shet and as per the audited accounts of the assessee for the year ending 31.03.2014 including Tax Audit Report for Assessment Year 2014-15 available on pages 3 to 37 of paper book, these are signed by a different Chartered Accountant Sudhakar S. Prabhu for Amarnath Kamath & Associates and therefore, this is not proper on the part of the AO to say that the valuation report is signed by the auditor. Regarding valuation report as on 31.03.2013 available on pages 95 to 107 of paper book, he submitted that this valuation report ....
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....hare valuation dated 02.02.2012 available on pages 38 to 54 of paper book, it is seen that this certificate is given by a different Chartered Accountant M/s. Manohar Shet & Co. and he has determined the value of shares at Rs. 100/- per share. In my considered opinion, the second report dated 15.11.2013 is not acceptable because the same is not certified by a person who is accepted as Accountant as per Rule 11U(a) of IT Rules, 1962. The AO accepted the fair market value of Rs. 100/- per share as per certificate dated 02.12.2012 and accepted the receipt of Rs. 90/- per share and taxed only the excess receipt of Rs. 300/- per share out of total receipt of Rs. 400/- per share and hence, the order of AO is in line with the earlier valuation report given by a Chartered Accountant who can be accepted as accountant as per Rule 11U(a) because this valuer has not been appointed as auditor of the assessee company. Hence in Assessment Year 2014-15, I find no reason to interfere in the order of CIT(A). In Assessment Year 2015-16, there is no report of any Chartered Accountant who can be considered as accountant as per Rule 11U(a) of IT Rules, 1962. The AO in this year has worked out the fair....