TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 468
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.... Commissioner of Income Tax, Corporate Circle-6(1), Chennai for the Assessment Year 2015 - 2016, u/s.143(3) of the Income Tax Act, 1961 (hereinafter "the Act") vide order dated 22.12.2017. 2. The Assessee has raised the following grounds, as under: "1. The learned Assessing Officer and the learned Commissioner of Income Tax (Appeals) has erred in including an amount of Rs.1,92,15,676/- u/s.56(2)(vii)(b) of the Act as undisclosed income and thereby arriving at a total income / loss of Rs.59,53,430/- for the Assessment Year 2015-2016. 2. The learned Assessing Officer and the learned Commissioner of Income Tax (Appeals) has erred in rejecting the valuation of the shares adopted by the Appellant, viz. cash flow method for issuance of shar....
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....termining the 'fair market value [FMV] of such shares at premium. 8. It is submitted that the learned Assessing Officer has erred in holding that the projections of the management are unrealistic by comparing it with the actuals." 3. The brief facts of the case are that the Assessee/Appellant is engaged in the business of servicing pipes and tanks for petrochemical industries, filed its return of income for the Assessment Year 2015 - 2016 on 30.09.2015 admitting the current year loss amounting to Rs.2,51,69,106/-. During the financial year relevant to the Assessment Year 2015 - 2016, the Assessee company had issued 2,15,955 equity shares of Rs.100/- each as face-value and with a premium of Rs.8/- per share to the existing shareholder of t....
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....ubmissions and also after going through the case-laws relied upon and also certain judicial proceedings, opined that there is no commercial expediency in the investment of the parent company at a premium of Rs.8/- per share. Further, the Assessee has determined the share price on the basis of DCF Method. However, the projected cash flow considered by the Assessee when compared with the actuals at subsequent years, there is a huge difference between the projected financials and the actual financials. Therefore, the Assessee has not justified in determination of the share price of Rs.108/- per share and thus, rejected the arguments of the Assessee and sustained the additions made by the Assessing Officer towards the share premium u/s. 56(2)(v....
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....r of the learned Commissioner of Income Tax (Appeals) submitted that the Assessee could not justify the issuance of shares at Rs.108/- per share. The Assessing Officer has determined the share price at Rs.18.97 per share as per the Net Asset Value [NAV] method. However, the Assessee has determined the share price at Rs.107.95 per share on the Discounted Cash-Flow [DCF] Method. The Assessing Officer had rejected the DCF Method because of the inconsistency in the projected cash-flow and the actual cash-flow for the relevant assessment year. Therefore, the Commissioner of Income Tax (Appeals) rightly has upheld the additions made by the Assessing Officer and the order should be upheld. 8. We have heard both the parties, perused the materials ....
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....owers and determined the share price of Rs.18.97 by changing the valuation method from DCF Method to NAV Method, even though as per law, the Assessing Officer cannot change the method followed by the Assessee for valuation of the shares as it is optional for the Assessee to choose a particular method for determining the share price. 10. In this case, the Assessing Officer has changed the method of valuation from DCF Method to NAV Method without their being any observation with regard to the DCF Method followed by the Assessee. Therefore, we are of the considered view that the Assessing Officer has erred in changing the method of valuation of the shares from DCF Method to NAV Method. 11. Having said so, let us examine the issuance of the p....