AI Drafter 
TaxTMI 
TaxTMI 
2021 (9) TMI 1091
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....law and on facts in confirming the addition of Rs. 1,36,03,086/- made by the Assessing Officer u/s. 56(2)(viib) of the Act in respect of share premium. The CIT(A) ought to have deleted the aforesaid addition of Rs. 1,36,03,086/- as made by the Assessing Officer. 2. The CIT (A) has erred in law and on facts in passing the appellate order, which is invalid and bad in law. Further, the order passed by the Assessing Officer is also invalid and bad in law. As evident, the assessee is aggrieved by confirmation of certain additions u/s 56(2)(viib) for Rs. 136.03 Lacs. 2.2 The provisions of Sec. 56(2)(viib), as inserted by Finance Act, 2012 w.e.f. 01/04/2013, inter-alia provide that where a company (not being a company in which the public are substantially interested) receives any consideration for issue of shares that exceeds the face value of such shares, then any consideration which is excess of fair market value (FMV) of shares shall be chargeable to tax as Income from other sources. For the purpose of this section, FMV shall be the value, higher of the following: (a) as may be determined in accordance with such methods as may be prescribed (methods prescribed under R....
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.... as shown in the balance-sheet and PV would be paid-up value of such equity shares. The valuation thus arrived on the basis of above formula, yielded FMV as Rs. 151/- per share. Therefore, the excess premium of Rs. 873/-per share (Rs. 1024 - Rs. 151) was to be added u/s 56(2)(viib). The same resulted into impugned addition of Rs. 136.03 Lacs in the hands of the assessee. Appellate Proceedings 4. The Ld. CIT(A) justified rejection of valuer's valuation by noticing that the method of valuation was full of defects and based on data of self-serving documents. The Valuer clearly mentioned that no independent analysis was made for valuation of shares rather the same was based on reports and documents provided by the assessee. Nothing was given in support of profits projections. The actual figure of next three years was negative in contrast to the projections made in the report. The basis for estimation made in the valuation under DCF method was not furnished by the assessee. Therefore, the said method was correctly rejected by Ld.AO and the additions were justified. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 5. Upon careful consid....
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....hod of valuation which has been opted for by the Assessee. Similarly is the ratio of decision of Hon'ble Madras High Court in CIT V/s VVA Hotels (P) Ltd. (2020) 122 taxmann.com 106. The Hyderabad Tribunal in DQ (International) Ltd. V/s ACIT (2016) 72 taxmann.com 142 held that projections could not be replaced with actuals down the line. The valuation will go either way. When it goes to north, the revenue may adopt the same and when it goes to south, the assessee may adopt and therefore, there won't be any consistency. What is important is the value available at the time of making business decision. It should be left to the wisdom of the businessman. The method adopted should be consistent and should be documented to review in the future. The review does not mean replacing the projection with actuals. It is the rational of adopting the values for making decision at the point of time of making decision. When the values are replaced subsequently, it is not valuation but evaluation i.e. moving the post of result determined out of projections. Similar is the decision of Delhi Tribunal in Cinestaan Entertainment (P) Ltd. vrs. ITO (2019) 106 taxmann.com 300 wherein the coordinat....
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.... Year 2015-16 9. Facts are substantially the same in this year. In this year, the assessee fetched a premium of Rs. 75/- per share on fresh issue of shares. The shares were issued to HUF entity of a director of the assessee and three other investors as detailed in para-7 of the order. The valuation was arrived at as per Rule 11UA by adopting DCF method of valuation. However, Ld. AO opined that excess premium was hit by the provisions of Sec. 56(2)(viib) since the Book value of the share was Rs. 0.12 per share as against issue price of Rs. 85/- per share. The valuation adopted exorbitant future cash flows. The assessee was a loss making entity and no investor would pay premium for loss making entity. Therefore, the excess premium of Rs. 75/- per share was added to the income of the assessee. 10. In the alternative, Ld. AO proposed addition u/s 68 though the assessee submitted copy of ITR, confirmation, bank statements etc. However, it did not submit copy of Balance Sheet and Profit & Loss Account to prove the creditworthiness. Further, the major investor i.e. M/s Parth Infracon Private Ltd. was incurring losses and the investments in assessee's entity were funded out of funds ....