TaxTMI 
TaxTMI 
TaxTMI 
2020 (10) TMI 454
X X X X Extracts X X X X
X X X X Extracts X X X X
....ised. The assessee had incurred loss in that year and it was also having brought forward business losses. Hence, the addition made by the A.O. in respect of excess share premium did not give rise to any tax liability. Since the assessee company was not properly advised of future tax implications, it did not file an appeal before Tribunal challenging the order passed by Ld. CIT(A). 4. The A.O. made an identical addition of excess share premium in assessment year 2016-17 also and it was confirmed by Ld. CIT(A). When the assessee approached a new counsel for filing appeal against order of Ld. CIT(A) passed for assessment year 2016- 17, the assessee was advised that it should have filed an appeal for assessment year 2015-16 also. Since the issues urged in both the years are identical in nature, and since the assessee came to know of the tax implications in not filing appeal for assessment year 2015-16, it immediately took steps for filing appeal for assessment year 2015-16 also as advised by the new counsel. Accordingly, the Ld. A.R. submitted that the assessee failed to prefer appeal in time due to ignorance of legal complications. Accordingly, Ld. A.R. prayed that the delay in filin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee has issued 11480 shares @ Rs. 632/- per share and collected share premium of Rs. 1,11,92,008/-. In this year also, the assessee had followed DCF method to determine the value of shares. The A.O. in this year also, took the view that the net asset value method is the appropriate method to determine the fair market value of share. Accordingly, the A.O. determined the net asset value of shares at Rs. 37/- per share. Accordingly, he determined the excess share premium at Rs. 1,08,80,104/- and assessed the same as income of the assessee under the head "income from other sources" u/s 56(2)(viib) of the Act. 8. In both the years, the Ld. CIT(A) confirmed the addition made by the A.O. Hence, the assessee has filed these appeals before us. 9. The Ld. A.R. submitted that the A.O. did not examine the workings given in the valuation report prepared u/s DCF method. He submitted that the DCF method is one of the recognized methods under Rule 11UA of I T Rules. Accordingly, he submitted that the A.O. was not justified in rejecting the DCF method without examining the valuation report furnished by the assessee. He submitted that an identical issue was considered by the coordinate bench in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reproduce paras 11 to 14 from the Tribunal order cited by learned AR of the assessee having been rendered in the case of Innoviti Payment Solutions Pvt. Ltd., Vs. ITO (supra). These paras are as follows: "11. As per various tribunal orders cited by the learned AR of the assessee, it was held that as per Rule 11UA (2), the assessee can opt for DCF method and if the assessee has so opted for DCF method, the AO cannot discard the same and adopt other method i.e. NAV method of valuing shares. In the case of M/s. Rameshwaram Strong Glass (P) Ltd. vs. The ITO (Supra), the tribunal has reproduced relevant portion of another tribunal order rendered in the case of ITO vs. M/s Universal Polypack (India) Pvt. Ltd. in ITA No. 609/JP/2017 dated 31.01.2018. In this case, the tribunal held that if the assessee has opted for DCF method, the AO cannot challenge the same but the AO is well within his rights to examine the methodology adopted by the assessee and/or underlying assumptions and if he is not satisfied, he can challenge the same and suggest necessary modifications/alterations provided the same are based on sound reasoning and rationale basis. In the same tribunal order, a judgment of Ho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to examine and consider these tribunal orders. Respectfully following this judgment of Hon'ble Bombay High Court, we set aside the order of CIT (A) and restore the matter to AO for a fresh decision in the light of this judgment of Hon'ble Bombay High Court. The AO should scrutinize the valuation report and he should determine a fresh valuation either by himself or by calling a final determination from an independent valuer and confront the same to the assessee. But the basis has to be DCF method and he cannot change the method of valuation which has been opted by the assessee. In our considered opinion and as per report of research committee of (ICAI) as reproduced above, most critical input of DCF model is the Cash Flow Projections. Hence, the assessee should be asked to establish that such projections by the assessee based on which, the valuation report is prepared by the Chartered accountant is estimated with reasonable certainty by showing that this is a reliable estimate achievable with reasonable certainty on the basis of facts 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 reas....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... valuation which has been opted by the assessee. The Tribunal has followed the judgment of Hon'ble Bombay High Court and disregarded various other Tribunal orders against the assessee which were available at that point of time. In the present case also, we prefer to follow the judgment of Hon'ble Bombay High Court rendered in the case of Vodafone M-Pesa Ltd., Vs. Pr. CIT (supra) in preference to the judgment of the Hon'ble Kerala High Court cited by DR of the Revenue rendered in the case of Sunrise Academy of Medical Specialities (India) (P.) Ltd. Vs. ITO (supra) because this is settled position of law by now that if two views are possible then the view favourable to the assessee should be adopted and with regard to various Tribunal orders cited by learned DR of the Revenue which are against the assessee we hold that because we are following a judgment of Hon'ble Bombay High Court rendered in the case of Vodafone M-Pesa Ltd., Vs. Pr. CIT (supra), these tribunal orders are not relevant. In the case of Innoviti Payment Solutions Pvt. Ltd., Vs. ITO (supra), this judgment of Hon'ble Bombay High Court was followed and the matter was restored back to the file of AO fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....amount shown in the balance-sheet as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset; L = book value of liabilities shown in the balance sheet, but not including the following amounts, namely:- (i) the paid-up capital in respect of equity shares; (ii) the amount set apart for payment of dividends on preference shares and equity shares where such dividends have not been declared before the date of transfer at a general body meeting of the company; (iii) reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation; (iv) any amount representing provision for taxation, other than amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto; (v) any amount representing provisions made for meeting liabilities, other than ascertained liabilities; (vi) any amount representing contingent liabilities other than arrears....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he DCF method are the expected and projected revenues. Accordingly the valuation is on the basis of estimates of future income contemplated at the point of time when the valuation was made. It has been clarified by the Assessee that the product which was being developed by the Assessee has substantial value and the Assessee was able to raise funds to the tune of Rs. 50.13 crores from international market 22. In view of the above legal position, we are of view that the issue with regard to valuation has to be decided afresh by the AO on the lines indicated in the decision of ITAT, Bangalore in the case of VBHC Value Homes Pvt.Ltd., Vs ITO (supra) i.e., (i) the AO can scrutinize the valuation report and he can determine a fresh valuation either by himself or by calling a determination from an independent valuer to confront the assessee but the basis has to be DCF method and he cannot change the method of valuation which has been opted by the assessee. (ii) For scrutinizing the valuation report, the facts and data available on the date of valuation only has to be considered and actual result of future cannot be a basis to decide about reliability of the projections. The primary ....