TaxTMI 
TaxTMI 
2020 (7) TMI 128
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....ration received by the appellant for allotment of these shares exceeded the fair market value of the shares under the facts and in the circumstances of the appellant's case. 3. The learned CIT[A] ought to have appreciated that the appellant had allotted equity as well as preference shares having a face value of Rs. 100 per share at a premium of Rs. 800 per share which was fixed on the basis of the valuation report of a Chartered Accountant who had adopted the Discounted Cash Flow [DCF] method for valuation of the shares that was recognized under the Rules notified under section 62 of the Companies Act, 2013 as well as the RBI Notification under FEMA for allotments made to non-residents as well as under Rule 11UA[2][c] (before amendment wef 25/04/2018) under the facts and in the circumstances of the appellant's case. 4. The learned CIT[A] erred in holding that the valuation report of the Chartered Accountant submitted by the appellant in support of the share value allotted to residents as well as non-residents was an afterthought and allegedly based on the principles of reverse engineering to justify the abnormally high value of shares under the facts and in the circumst....
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....d he submitted a copy of this Tribunal order and pointed out that in para 9 of this Tribunal order, the Tribunal has reproduced the relevant portion of another Tribunal order rendered in the case of Innoviti Payment Solutions Pvt. Ltd. Vs. ITO as reported in 175 ITD 10 (Bang.). He further pointed out that in that earlier order rendered in the case of Innoviti Payment Solutions Pvt. Ltd., Vs. ITO (supra), the Tribunal has followed the judgment of Hon'ble Bombay High Court rendered in the case of Vodafone M-Pesa Ltd. vs. PCIT as reported in 164 DTR 257 and it was held that as per the judgment of Hon'ble Bombay High Court, the AO can scrutinise the valuation report and determine a fresh valuation either by himself or by calling for a final determination from an independent valuer to confront the petitioner but the basis has to be the DCF Method and he cannot change the valuation method. He further pointed out that in the present case, as per page 3 of the Assessment Order, the AO for making the addition in dispute has adopted fair market value of the unquoted shares issued by the assessee at premium whereas the assessee had opted for DCF method and this is noted by the AO on page 4 of....
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....ssary modifications/alterations provided the same are based on sound reasoning and rationale basis. In the same tribunal order, a judgment of Hon'ble Bombay High Court is also taken note of having been rendered in the case of Vodafone M-Pesa Ltd. vs. PCIT as reported in 164 DTR 257. The tribunal has reproduced part of Para 9 of this judgment but we reproduce herein below full Para 9 of this judgment. "9. We note that, the Commissioner of Income-Tax in the impugned order dated 23rd February, 2018 does not deal with the primary grievance of the petitioner. This, even after he concedes with the method of valuation namely, NAV Method or the DCF Method to determine the fair market value of shares has to be done/adopted at the Assessee's option. Nevertheless, he does not deal with the change in the method of valuation by the Assessing Officer which has resulted in the demand. There is certainly no immunity from scrutiny of the valuation report submitted by the Assessee. Therefore, the Assessing Officer is undoubtedly entitled to scrutinise the valuation report and determine a fresh valuation either by himself or by calling for a final determination from an independent valuer ....
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....s available on the date of valuation and actual result of future cannot be a basis of saying that the estimates of the management are not reasonable and reliable. 13. Before parting, we want to observe that in the present case, past data are available and hence, the same can be used to make a reliable future estimate but in case of a start up where no past data is available, this view of us that the projection should be on the basis of reliable future estimate should not be insisted upon because in those cases, the projections may be on the basis of expectations and in such cases, it should be shown that such expectations are reasonable after considering various macro and micro economic factors affecting the business. 14. In nutshell, our conclusions are as under:- (1) The AO can scrutinize the valuation report and the if the AO is not satisfied with the explanation of the assessee, he has to record the reasons and basis for not accepting the valuation report submitted by the assessee and only thereafter, he can go for own valuation or to obtain the fresh valuation report from an independent valuer and confront the same to the assessee. But the basis has to be DCF method and ....