TaxTMI 
TaxTMI 
2022 (4) TMI 483
X X X X Extracts X X X X
X X X X Extracts X X X X
....ating that the method of valuation adopted by the Assessee fetched the same result as prescribed in Rule 11UA of the Income-tax Rules 1962, and even otherwise, valuation as submitted to the Assessing Officer under discounted cash flow method recognized under Rule 11 UA fetched the same result as worked out in earlier method. 2. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in arriving value per share at Rs. 27.90 Which was below the face value per share disregarding the legal position that a company is prohibited from issuing shares at discount in terms of section 53 of the Companies Act 2013. 3. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in appreciating that Rule 11 UA of Income Tax Rules, 1962, which determines the valuation of unquoted shares and being a provision which purports to determine the income which is chargeable to tax was introduced by Income Tax (Fifteenth Amendment) Rules, 2012, came into effect on November 29, 2012, and so the said valuation rules cannot be applied. 4. On the facts, and in circumstances of the case, and in law,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g the additional grounds raised by the assessee harp on the issue of addition under section 56(2) (vii) (b) read with rule 11UA of I.T. Rules, 1962. 7. Ground Nos. 1, 2, 6, 7 & 8 are inter-related, hence, discussed, analyzed and disposed of as under: "Assessee/Appellant issued 12600 shares of Rs. 100/- each at a premium of Rs. 900/- each (each share of Rs. 1000/-). As per assessee, he followed Net Asset Valuation method which is almost in line with Rule 11UA of the Income Tax Rules, 1962 (for short 'the Rules')". All the five shareholders subscribed to the shares of the assessee @ Rs. 100/- per share + Rs. 900/- as premium. Total shares subscribed as per Exhibit -9 of the PB are 12,600 equity shares. 8. Assessee worked out premium on each shares as under: "ASSET Investment in Equity Instrument 1. (SPOTLESS LAUNDRY SERVICES PVT. LTD.) 1, 25, 63,000 2. Bank & Cash balance 92,967 LESS: Provision for Expense 13,000 NET ASSET 1, 26, 42,967 No. of Share issued 12,600 Therefore, value per Share (rounded off to nearest ten) 1,000 09. The Assessee was submitted that, even otherwise, if method prescribed under Rule 11UA is adopted, it will fetch the same result.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....less Laundry Services Pvt. Ltd. vide page nos. 15 & 16 of PB and ledger account of share application money received from Akash Dharamsey, Devchand Dharamsey, Dr. Meera Dharamsey, Gorden Jagwani and Neetu Jagwani vide page nos. 17 to 21 of PB. From the aforesaid documents relied upon by the assessee, we have noticed that the assessee had tried to justify the flow of money for the investment in the shares of M/s. Spotless Laundry Services Ltd. 14. During the course of argument, Ld. AR for the assessee was asked to place (within 3 days) on record the Balance Sheet of M/s Spotless Laundry Services Ltd. in which huge investments has been made to examine the issue, if it is a genuine transaction. However Ld. AR failed to place the same on record. So, adverse inference has to be drawn, that it is not a genuine transaction of assessee. 15. We have examined the impugned order passed by the Ld. CIT (A), who has uphold the addition made by the AO by specific findings in his order. When we examine the findings of Ld. CIT (A) in the light of ledgers maintained/produced by the assessee available at page nos. 17 to 21 and 14 of the PB, relied upon by the assessee during the course of argument,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....valuation of shares issued on premium, this method has been accepted in Toto by the AO and CIT (A). There is no challenge to the method of valuation adopted by assessee, although the ld. CIT (A) corrected the figures of NAV calculation as against adopted by the assessee. Which is permissible by law, although method of valuation chosen by assessee can't be changed. 17. As per rule11UA, the assessee only has 2 options for working out FMV of unquoted shares viz., NAV method or discounted cash flow method. Since the assessee did not furnish any valuation report as per DCF method, it can be reasonably inferred that assessee had adopted NAV method. Valuation under rule 11UA is prescribed to ascertain worth of the share issuing entity and simultaneously to justify share premium charged by it. 18. In this case Assessee Company issued the shares on premium first and then invested the same in the shares of M/s Spotless Laundry Services Ltd. (as demonstrated above in the tables) to justify its net worth or in other words NAV. The event which is to take place first, occurred second and vice-versa. 19. To substantiate its argument assessee relied on following authorities as under: A). DCIT....