2022 (8) TMI 795

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.... by the assessee." 03. The assessee in ITA No. 1644/Mum/2019 has raised concise grounds of appeal as under:- "1. BECAUSE the CIT(A) has erred in law and on facts in upholding the disallowance of Rs. 1,93,38,298/- made by the AO u/s. 56(2)(viib) of the Income Tax Act, 1961 which is based on incorrect computation of fair market value of shares.. 2. BECAUSE, the CIT (A) has erred on facts and in law in holding that the AO's valuation is as per Rule 11UA, which is to be done on the date of receipt of consideration, whereas AO's valuation is based on the balance sheet of the preceding year. 3. BECAUSE, the CIT (A) has erred on facts and in law in upholding that the AO's valuation even though it has adopted an incorrect date of fair market valuation of shares. 4. BECAUSE, the CIT (A) has erred on facts and in law in falling to consider that for the purposes of section 56(2)(viib), the higher of the two prescribed valuations is to be taken. 5. BECAUSE, the CIT(A) has erred in law and on facts in upholding Rs. 1,01,20,374/ being estimated disallowance of Interest u/s. 36(1)(ii) on loans amounting to Rs. 11,34,22,705/- ignoring the....

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....ved Rs.3136.40 per share, therefore made an addition of Rs.2821.05 per share amounting to Rs.1,93,38,298/- under Section 56(2) (viib) of the Act. ii. Learned Assessing Officer further noted that Assessee has earned dividend income of Rs.17,910/- as exempt income under Section 10(34) of the Act but did not disallow any expenses under Section 14A of the Act. On 10 November 2017, the learned Assessing Officer issued notice for invoking Rule 8D of the Rules for working out the disallowance under Section 14A of the Act. Assessee did not respond and therefore, the learned Assessing Officer made a disallowance of Rs.3,46,18,729/- as per Rule 8D under Section 14A of the Act. He also made an addition of the same amount to the book profit under Section 115JB of the Act. iii. During the course of hearing, the learned Assessing Officer noted that assessee has claimed interest expenses of Rs.4,63,18,954/- and noted that assessee has advanced loans to the companies without charging interest of Rs.11,29,31,277/-. Assessee has shown interest income of Rs.10,33,212/-. The learned Assessing Officer found that assessee has paid interest at the rate of 12.63 per annum. Hence, he foun....

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....Ltd. v. CIT [2015] 61 taxmann.com 118 (Delhi) and CIT Vs. Cortech Energy P. Ltd. [2014 (3) TMI 856 - Guj] The learned Departmental Representative could not show us any infirmity in the appellate order. Accordingly, we confirm the order of the learned CIT (A) in restricting the disallowance under Section 14A of the Act to the extent of exempt income of Rs.17910/-. Accordingly, the solitary ground of appeal of learned Assessing Officer is dismissed. 09. In the result, ITA No. 1288/Mum/2019 filed by the learned Assessing Officer is dismissed. 010. Now, we come to the appeal of assessee in ITA No. 1644/Mum/2019. 011. Ground nos. 1 to 4 is against the addition under Section 56(2) (viib) of the Act of Rs.1,93,38,298/- regarding alleged excess share price received by the assessee. At the time of hearing, assessee moved a petition for admission of additional evidences under Rule 29 of the Rules. Assessee submitted exhibit C1 to exhibit C4 containing page nos. 32-38 as additional evidences. Assessee submitted that assessee inadvertently omitted to file certain documents before the lower authorities in support of valuation report. It was stated that these are necessary for deciding ....

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.... crores the market value of such shares is considered at Rs. 92.10 crores however for the purpose of valuation assessee considered only ¼ of such value for the purpose of valuation of equity shares of the company. In fact total book value of the assets as at 31/3/2014 of the company is 26.38 crores and value of the liabilities is 23.54 crores however, considering the above market value to that extent only as indicated in worksheet for valuation, the value of assets considered is Rs. 51.77 crore and liabilities were Rs. 23.54 crores. This resulted into the net asset valuation as on 30/11/2014 of Rs. 28.22 crores for 90,000 equity shares. Accordingly, the valuation was derived at Rs. 3136 per share. 014. Before the lower authorities assessee did not furnish any information that value of the flat at New Delhi is Rs. 7,914,248 which has an indicative market value of Rs. 28.66 crores but for the valuation of the equity share is only considered the value at Rs. 21.50 crores being only 3/4 value of the indicative market value. Similarly the investment in court in shares were having the book value of Rs. 146,394,641 having indicative market value as on 31/3/2014 of Rs. 921,074,73....

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....tion at (1) or (2) shall be considered as the fair market value of the shares. Rule 11UA of the income tax rules prescribes two methods by which the fair market value of the asset can be determined namely, (1) net asset value method and (2) discounted cash flow method. Therefore, the assessee has an option to justify the valuation of the shares either according to the above two methods prescribed under rule 11 UA or any other method or working based on which the value so arrived at which can be substantiated by the company to the satisfaction of the AO. The higher of the above three options/workings would be considered as 'fair market value'. In the present case, the assessee has worked out fair market value of the shares according to explanation (a) (ii) to section 56 (2)(viib) of the act. However, the learned assessing officer, in absence of proper justification by the assessee, could not verify the above valuation by assessee. Now assessee has tried to substantiate the same before us. In view of above additional evidences submitted by the assessee, we direct the assessee to justify the share valuation before the learned assessing officer as per explanation (a) (ii) of section 56....

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....ore, this advance cannot be considered for interest disallowances. With respect to the loan given of Rs. 11,90,400, to Combar India private limited, Rs. 225,000 to JKM Holdings private limited it is submitted that interest free loans were received from director of the company which has been utilized for giving these advances. With respect to advances given to other two different parties, it is stated that no disallowance of interest can be made as those loans are given before receipt of interest-bearing loans by the assessee. Therefore, no disallowance of interest should have been made. 020. We find that these are the new arguments taken by the assessee before us, same were not taken before the learned AO or the learned CIT - A. On careful consideration of the orders of the lower authorities, it is apparent that the claim of the assessee before us is that assessee has not advanced interest-bearing funds to the advances without charging interest to the related parties. However, the claim of the assessee before the lower authorities was only that assessee has given the advances for the business consideration and also assessee has enough interest free funds available and therefore ....