2020 (8) TMI 315

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... 2. Whether on the facts and in the circumstances of the case and in law, the ld CIT(A) is right in deleting the addition of Rs. 2,61,56,000/- made by the AO u/s.56(2)(viib) of the I.T.Act, 1961 following "net value method" as per Rule 11UA (2)(a) of the I.T.Rules, 1962? 3. Whether on the facts and in the circumstances of the case and in law, the ld CIT(A) is right in law in holding that the assessee is entitled to value the shares as per the provisions of Rule 11UA (2)(b) inserted w.e.f 29.11.2012 when the assessee had received the consideration amount towards issue of shares prior to 29.11.2012 ?" 3. The relevant facts, as emerged from the order of the CIT(A), are that the assessee, during the relevant previous year h....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....as income from other sources. 4. On appeal before the first appellate authority, the assessee contended that since the shares were issued much after 29.11.2012, being the date with effect from which Rule 11UA(2) came into force and the major amount towards issues of share was received after 29.11.2012, the AO is not justified to reject the fair market value calculated as per discounted free cash flow method prescribed under Rule 11UA(2)(b) of the Act. It was also contended that the discounted free cash flow method is a well recognized method for valuation of shares which could be adopted for valuation of shares even before insertion of Rule 11UA(2). 5. After considering the submissions of the assessee, the ld CIT(A) deleted the additi....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ed free cash flow method, nothing is taxable u/s.56(2)(viib). On the facts of the assessee's case since the shares have been issued at Rs. 180/- per share as against the fair market value of Rs. 189/- determined as per discounted free cash flow method, no amount is required to be taxed u/s.56(2)(viib). Hence, the addition of Rs. 2,61,56,000/- is deleted." 6. Ld Departmental Representative (DR) submitted that since Rule 11UA(2) was inserted w.e.f. 29.11.2012 and the assessee had received the consideration amount towards issue of shares prior to 21.11.2012, the provisions of Rule 11UA(2) were not applicable in the case of the assessee and, therefore, the market value of the shares was required to be determined as per Rule 11 UA(1)(c)(b) an....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....b) of the Act. Ld counsel also pointed out that since shares have been issued by the assessee at Rs. 180/- per share as against the fair market value of Rs. 189/- determined as per discounted free cash flow method, no addition is required to be made in the hands of the assessee u/s.56(2)(viib) of the Act. Therefore, the findings recorded by ld CIT(A) may kindly be upheld. 9. We have heard the rival submissions and perused the relevant materials placed on the record of the Tribunal. In this case, the assessee had issued 2,00,000 equity shares of face value of Rs. 10/- to One M/s. Enbee Resources Pvt Ltd., on 7.1.2003 at Rs. 180/- per share which included premium of Rs. 170/- per share. It is the explanation of the assessee that since t....