TaxTMI 
TaxTMI 
2021 (12) TMI 1284
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....ssue involved therein relates to the addition of Rs. 20,00,000/- made by the Assessing Officer and confirmed by the ld. CIT(A) being the difference between the fair market value (FMV) of the shares and the value actually received by the assessee company u/s. 56(2)(viib) of the Income Tax Act, 1961 (hereinafter 'the Act') read with Rule 11UA of the Income Tax Rules, 1962 (hereinafter 'the Rules'). 2. The assessee in the present case is a company which is engaged in the business of manufacturing and sale of laminated rolls and tarpaulin. The return of income for the year under consideration was filed by the assessee on 21/11/2014 declaring a loss of Rs. 59,56,603/-. During the year under consideration, the assessee company ....
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....not available or prepared. The Assessing Officer was wrong in taking a valuation not allowable in law only with the intension of rejecting the valuation as provided by the assessee and making an addition based on the deeming provision and the same is based on incorrect interpretation of section 56(2)(viib) read along with Rule 11UA and as such the addition made may kindly be deleted." 4. The ld. CIT(A) did not find merit in the submission made on behalf of the assessee and proceeded to confirm the addition of Rs. 20,00,000/- made by the Assessing Officer for the following reasons given in his impugned order:- "I have considered the submission of the appellant and perused the relevant assessment records. The only issue in this ap....
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....which the property or consideration, as the case may be, is received by the assessee." The definition of property under explanation (d) to section 56(1) includes shares and securities. Therefore, the date of valuation of shares for which fair market value has to be computed as per on date of transfer or allotment of the shares. This view is fortified by Rule 11UAA which was introduced by the Income-tax (20th Amendment) Rules, 2017 - CBDT Notification G.S.R. 865(E) dated 12th July, 2017 - w.e.f. the 1st day of April, 2018 which clearly states that "for the purpose of section 50CAFMV of unquoted shares shall be determined in the manner provided in Rule 11UA(1)(c)(b) or Rule 11UA(1)(c)(c) as the case may be. Valuation date for the pur....
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....sheet available as on the date of allotment. He has contended that the Assessing Officer as well as the ld. CIT(A), however, made the valuation of shares on the basis of balance sheet of the assessee as on 31/03/2013 which was audited on 25/07/2013 and was not available on the date of allotment of shares i.e., on 15/07/2013. In support of this contention, he has relied on the definition of 'balance sheet' given for the purpose of Rule 11UA in Clause (b) of Rule 11U which reads as under:- "11U. For the purposes of this rule and rule 11UA,- (a) .............. (b) "balance-sheet", in relation to any company, means,- (i) for the purposes of sub-rule (2) of rule 11UA, the balance-sheet of such company ....
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....e unable to accept the contention of the ld. Counsel for the assessee. The shares having been allotted by the assessee company on 15/07/2013, the valuation date was 15/07/2013 and since the balance sheet of the assessee company was not drawn up on the said valuation date, the balance sheet drawn up as on a date immediately preceding the valuation date, which has been approved and adopted in the AGM of the shareholders of the company, was to be taken as the balance sheet for the purpose of valuation as per Rule 11UA read with Clause (b) of Rule 11U. In the present case, the last balance sheet of the assessee company was drawn as on 31/03/2013 being a date immediately preceding the valuation date but since the same was audited on 25/07/2013 i....