TaxTMI 
TaxTMI 
TaxTMI 
2021 (3) TMI 17
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....nt was completed at an income of Rs. 1,11,91,703/- after making addition of Rs. 1,07,82,453/- u/s 56(2)(b)(viib) of the Act and making another disallowance of Rs. 4,09,250/- on account of disallowance of ROC fees paid by the assessee company. 2.1 The assessee's appeal before the Ld. CIT (A) was dismissed and now the assessee has approached this Tribunal challenging both the additions/disallowances by raising the following grounds of appeal: "1. That on facts and circumstances of the case, the order passed by the Ld. CIT(Appeals) is bad both in the eyes of law and on facts. 2. That the Ld. CIT (Appeals) has erred on facts and in law in confirming the action of the AO i.e. rejecting the justification of Share Premium on the basis of Discounted Cash Flow (DCF) method. 3. That the Ld. CIT (Appeals) has erred on facts and in law in not appreciating that the Share Premium has been charged on the basis of Valuation Report by qualified Chartered Accountant following Discounted Cash Flow (DCF) method. 4. That the Ld. CIT (Appeals) has erred on facts and in law in confirming the action of the AO i.e. confirming the addition of Rs. 1,07,82,456/-. 5. That the Ld. CIT(Appeals) ha....
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....ockland Hospital to acquire shares of the erstwhile shareholders in the month of November, 2014 and this action of the AO was confirmed by Learned Commissioner of Income Tax (Appeals). 3.2 The Ld. AR further submitted that the entire amount received on issuance of fresh shares was invested in Capital Work in Progress, which at 31, March 2015, stood at Rs. 1.44 crores in the books of accounts which would clearly show that the requirement of fresh share capital at a premium was used for bona fide purposes and in furtherance of the objective to start the diagnostic centre. 3.3 The Ld. AR submitted that the main issue arising in the appeal is whether the valuation as per this method prescribed under section 56 (2)(viib) of the Act could be disregarded on mere assumptions/surmises on the ground that the valuation of equity shares was based on projection of revenue which did not match with the actual revenues of subsequent years. 3.4 The Ld. AR submitted that the shareholder who invested in the shares is "Rockland Hospital" who has a good track record and has been successfully running 'three hospitals' in Delhi and NCR under the brand name of "Rockland". The footfall of patients from ....
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....made a categorical observation that the valuation report was prepared by a Chartered Accountant on the basis of the data provided by the management of the company who had not gone into the accuracy of the information relied upon in his report and that the Chartered Accountant had not made any independent investigation, examination, analysis, etc on the reliability of the data provided by the management of the company as was evident from the disclaimer certificate by the Chartered Accountant in the valuation report. 4.1 With respect to the disallowance of ROC fees, the Ld. Sr. DR placed reliance on the observations of the Assessing Officer. 5.0 We have heard the rival submissions and have also perused the material on record. So far as the issue of addition of Rs. 1,07,82,453/- is concerned, it is seen that the Assessing Officer has disregarded the valuation report mainly on the ground that valuation of equity shares was based on projection of revenue which did not match with the actual revenue during the subsequent years. In addition, the Assessing Officer has also adopted the Fair Market Value of the shares at Rs. 10/- being the price paid by the Rockland Hospital Limited to acqu....
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.... cannot be evaluated purely based on arithmetical precision as value is always worked out based on approximation and catena of underline facts and assumptions. Nevertheless, at the time when valuation is made, it is based on reflections of the potential value of business at that particular time and also keeping in mind underline factors that may change over the period of time and thus, the value which is relevant today may not be relevant after certain period of time. ... 33. In any case, if law provides the assessee to get the valuation done from a prescribed expert as per the prescribed method, then the same cannot be rejected because neither the Assessing Officer nor the assessee have been recognized as expert under the law." 5.1 Similarly, it has been held that where a valuation report is to be rejected, the authority should pinpoint any specific inaccuracies or short comings in the DCF valuation report. In the case of Intelligrape Software Pvt. Ltd., vs. ITO in ITA No.3925-Del- 2018 (Delhi Trib.), it has been held as under: "23. The AO was not able to pinpoint any specific inaccuracies or short comings in the DCF valuation report of the Chartered Accountant/Valuer other....