2020 (9) TMI 1021

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.... Tribunal 'C' Bench, Chennai for the assessment year 2013-14. 2.The following substantial questions of law have been raised by the Revenue for consideration of this Court:- "1.Whether on the facts and circumstances of the case and in law, the Tribunal was right in holding that provisions of Section 56(2)(viib) cannot be invoked in the assessee's case? 2.Whether the Tribunal was right in holding that the assessee has adopted a method prescribed by the Income Tax Act, without considering the fact that the value of shares adopted by the assessee (under discounted case flow method) does not reflect the true market value of the shares on that date?" 3.The assessee, a Private Limited Company, filed its return of income for the a....

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....ficer came to the conclusion that the assessee has made excessive projection of revenue without any reasonable basis. Accordingly, applied the provisions of Section 56(2)(viib) of the Act read with Rule 11UA(2) of the Income Tax Rules, 1957 (hereinafter referred to as "the Rules"). Ultimately, the Assessing Officer held that the Net Asset Value (NAV) method is the appropriate method, which should have been adopted for valuation of the shares and accordingly, computed the value and assessed the same at Rs. 18,51,22,790/- as income from other sources as per Section 56(2)(viib) of the Act, as the value of the shares sold, were unreasonable. 5.Challenging the said order dated 31.10.2016, the assessee preferred appeal before the Commissioner of....

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....ssee adopted the DCF method as available to it under Rule 11UA of the Rules for arriving at the value of the shares allotted and the share premium received. The CIT(A) noted that the Assessing Officer held that the projection made under Rule 11UA of the Rules is not accurate and there is excess projection of the sale revenue. The CIT(A) noted that the assessee has an option to adopt the NAV method or DCF method to arrive at the valuation of unquoted shares. It is relevant to point out that the CIT(A) very pertinently observed that unless the Assessing Officer is able to bring out any evidence of abuse of benevolent provisions with an intention to defraud the revenue, the option given to the assessee shall be held to be absolute. Further, a....

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....ent of ten times between value adopted by the assessee company as against its actual value of underlying assets; the CIT(A) erred in ignoring the finding of the Assessing Officer that there is no basis for the discount factor adopted by the assessee company as at 16%. The assessee contended before the Tribunal that they had adopted the DCF method as available under Rule 11UA of the Rules for arriving at the value of the shares allotted and the share premium received whereas, the Assessing Officer adopted the NAV method and re-valued the land owned by the assessee company for the purpose of determining the share value of the premium thereof. 10.It was submitted that when the assessee has adopted a particular method of valuation as provided ....