TaxTMI 
TaxTMI 
2019 (8) TMI 1858
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....(1) are different. 2. That under the facts and circumstances, both the lower authorities grossly erred in law as well as on merits in making and confirming the addition of Rs. 135,11,67,220/- u/s.56 (2) (viia) r/w Rule- 11UA. 2.1 That under the facts and circumstances, both the lower authorities exceeded the scope of this limited scrutiny asstt. by extending his examination towards applicability of sec.56 (2) (viia) r/w Rule-11UA against examination correctly to be done only u/s.68 of the I.T. Act, thus the examination and addition u/s.56 (2) (viia) since not permitted by Pr. CIT, as mandated by instructions, has been done without jurisdiction, consequently the resultant addition being without jurisdiction needs to be deleted threshold. 2.2 That under the facts and circumstances, the provisions of sec.56 (2) (viia) r/w Rule-11UA is not applicable at all. 2.3 That without prejudice, since the workings u/s.56 (2) (viia) r/w Rule-11UA is not possible, more so on account of not possible to get the audited balance sheet as on the valuation date by the auditor of the company appointed u/s.224 of the Companies Act, 1956 as sec.224 of Companies Act, 1956 was not in-force at the....
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....ending 31st March, 2015 were as under: S.No. Name Script in which invest made No. of share purchased Purchase @ per share Total amount of investment (Rs.) 1 Ambience buildcon Pvt Ltd 3,01,211 10 3012110 2 Aman hospitality Pvt Ltd' 48266526 10 482665260 3 Ambience IT Developers Pvt Ltd 2,500 10 25000 4 Greenline developers Pvt Ltd 2,81,492 10 814920 5 R.S.G. Housing and finance Pvt ltd. 4,97,500 10 4975000 6 Senator developers Pvt. Ltd. 2,54,130 10 2541300 7 Sara estates Pvt. Ltd. 4,62,335 10 4623350 8 Ambience highway developers Pvt.Ltd. 6,25,000 10 6250000 9 Ambience towers Pvt Ltd 2,21,368 12.21 2702903.28 10 Ambience homes Pvt Ltd 2,47,550 10 2475500 11 Ambience power projects Pvt Ltd 12,500 10 125000 12 Ambience home developers Pvt Ltd 2500 10 25000 13 Prime commercial Pvt Ltd 268225 10 2682250 14 Green vally realtors Pvt Ltd 2593 10 25930 15 Arman buildcon Pvt Ltd 625000 10 6250000 16 Indus sorurja Pvt Ltd 623457 40.88 25486922.16 17 Alankar apartments Pvt Ltd 47000 100 4700000 18 Ambience infracon Pvt Ltd 124415 100 12441500 19 Aldoka exporters Pvt Ltd 625000 1....
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....ous items forming part of the assets. The contention of the assessee was that these items did not represent the true value of the assets as they are fictitious asset value. 5. Apart from that, one of the contentions raised by the assessee was that a Fair Market Value of the shares as per Rule 11UA was not workable, because as per provision of Rule 11UA (1)(b) the Fair Market Value has to be derived from the balance sheet of the company drawn up on the date of valuation duly audited by the auditors appointed u/s. 224 of the Companies Act, 1956 as defined under rule 11U. However, w.e.f. 01.04.2014, new Companies Act, 2013 has come in operation under which appointment of auditors has been prescribed u/s.139 of the Companies Act and not u/s. 224, and therefore, the appointment of auditors u/s.224 was not possible and accordingly the valuation of a Fair Market Value of shares was not possible under the provision of Rule 11UA. 6. The Assessing Officer has dealt with all the objections of the assessee in detail and rejected the same on various counts as per his discussion in the order, which shall be dealt with in the later part of this order. Finally, he computed the excess of Fair M....
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....based on which the value is to be computed should be audited by the auditors of the same company. Simply because of the language of the provisions under Rule 11UA(b)(ii) has not been amended consequent to the introduction of new Companies Act, 2013, that does not mean that the said provision itself has become unworkable for computing the Fair Market Value of the shares. 9. One of the core contention raised by the assessee was that on the facts of the present case, provision of Section 56(2)(viia) would not be applicable on the transaction of investment because the same has been done in respect of group companies owned by common shareholders within the same family of Shri R.S. Gehlot and his HUF. It was submitted that the transaction was within the family and the beneficiaries would have been the same person, so there could not have been any manipulation either in the nature of transaction or any unaccounted money being transacted from one pocket to another. Thus, Ld. CIT(A) rejected the said contention after giving cogent and detailed reasoning; firstly, the company is an independent entity and the provision of the Companies Act have to be applied with and settlement arrived betwe....
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.... various adjustments made in the value of assets submitted before the Assessing Officer has to be given effect for which assessee has given detailed submission and also collated the adjustment proposed under Rule 11UA in the value of assets and liabilities. The adjustment made by the assessee before the Assessing Officer and also before the Ld. CIT(A) has been discussed in great detail by the Ld. CIT(A) and same have been rejected. Since, the claim of this adjustment has been the main bone of contention and one of the core arguments taken before us at the time of hearing, therefore, the relevant observation and the finding of the Ld. CIT(A) in this regard are summarized as under: * As regards the adjustment on account of earnest money/adjustments against plots forfeited by the government authorities, Ld. CIT (A) observed that assessee has not submitted any evidence of cancellation of allotment of forfeiture of the amount paid. Hence, the amount claimed by the assessee has not been proved. Further, amount of Rs.106,91,24,800/- which was forfeited by the NOIDA authority was still appearing in the books of Ambience Pvt. Ltd. * Secondly, as regards interest cost incurre....
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....he project and the sale price of the unit of the township are determined accordingly, which are recovered from the buyers. * Regarding the cost of damage electrical material, tiles, marbles and hardware etc., the same was rejected on the ground that there was no corroborative evidence filed by the assessee and even otherwise also if it is assumed that said cost incurred actually represents the cost of damaged goods then also no reduction/adjustment can be allowed because same represents the normal loss borne out by the company. * Regarding impairment in the value of property due to adverse court order, etc., Ld. CIT(A) held that nowhere any suit has been filed before any Court and no facts have been mentioned and how the judgment of the Court impacts the value of the asset as on 30.03.2015. * Lastly, with regard to the adjustment for statutory liability, Ld. CIT(A) held that assessee has not mentioned any figure of adjustment or the name of the company in the valuation of which the said adjustment is sought for. 14. Accordingly, the appeal of the assessee was dismissed. Contention of the Assessee on Legal Issue u/s 127 15. Before us, ld. counsel for the....
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....bsence of the same the Asstt. is to be treated as illegal. ii) AJANTHA INDUSTRIES AND ORS. VS. ABDT & ORS. 102 ITR 281 (SC) Held that - The requirement of recording reasons U/s. 127 (1) for transfer of a case from one AO to another is a mandatory direction and non - communication thereof to the assessee is not saved by showing that the reasons exist in the file although not communicated to the assessee. iii) RISHABH BUILDCON (P) LTD. VS. CIT & ORS. (2011) 57 DTR (DEL.) 252 On a reading of the provisions of S. 127 three aspects emerge: (i) a show-cause notice has to be issued and a reply has to be called for; (ii) the assessee has to be afforded opportunity of hearing; (iii) the authority concerned has to pass a reasoned order. The provision requires reasons shall be given by the authority. The reasons are to be cogent and germane having nexus to the facts of the case. iv) ITO VS. KRISHAN KUMAR GUPTA (2008) 16 DTR (DEL.) (TRIB.) 1 Held "Moreover, ITO Ward-33 (2) exercised jurisdiction merely on the basis of information given by ITO, Ward-25(4) and transfer of fde by the said ITO, and the case was not transferred to him by any order passed u/s. 127 by any competent author....
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....roceedings before the Assessing Officer in response to the notice u/s.143(2) and 142(1) and filed the requisite details from time to time. Even survey u/s.133A was also conducted by the officers under the same range and statements were also recorded and till that time assessee had not raised any objections and has duly participated in the assessment proceedings. Thus, the case of the assessee is squarely covered u/s.124(3) of the Act, and therefore, assessee now cannot question the jurisdiction of the Assessing Officer after the expiry of one month of issue of notice u/s.143(2)/142(1). In support, he strongly relied upon the judgment of Hon'ble Jurisdictional High Court in the case of Abhishek Jain vs. ITO, 94 Taxmann.com 355 (Delhi) and CIT vs. S.S. Ahluwalia, 46 Taxmann.com 169 (Delhi). 18. At the time of hearing, we directed the Ld. CIT-DR to ascertain, whether any order has been passed by the competent authority u/s.127 for transferring the case from Central Circle-20 to ITO, Ward-21(1). In response, the ld. CITDR had submitted a screen shot from the Department website which shows that PAN of the assessee has been transferred from Central Circle-20, Delhi to Ward-21(1), Delhi ....
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....direction or an order issued u/s.120(1) or 120(2) vesting the Assessing Officer with a jurisdiction of an area, i.e., where there is an assignment of the jurisdiction of an Assessing Officer. Sub section (1) of Section 124 assigns Assessing Officer's jurisdiction linked with the territory. Sub Section (2) of Section 124 provides that assessee may raise objection regarding the correctness of the jurisdiction with respect to territorial jurisdiction u/s. 124(1). Sub Section (3) of section 124 provides for time limit for raising such objection. Here, it is not a case where assessee is challenging the territorial jurisdiction of the Assessing Officer albeit what has been challenged before us is that, Assessing Officer inherently lacked jurisdiction due to non passing of mandatory order u/s.127(2)(a) by the competent authority. It is now wellestablished principle of law that there is a distinction between lack of jurisdiction and irregular exercise of jurisdiction. The proceedings render void ab initio when the authority taking it has no power to have succinic over the cases. 21. The Hon'ble Delhi High Court in the case of Abhishek Jain vs. ITO (supra) had on an occasion to deal with t....
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....sing Officer within the time limit and in terms of sub-section (3), and the Assessing Officer is not satisfied with the correctness of the claim, he is required to refer the matter for determination under sub-section (2) before the assessment is made." Further, the Hon'ble High Court held that: "Section 127 relates to transfer of case from one Assessing Officer having jurisdiction to another Assessing Officer, who is otherwise not having jurisdiction as per directions of the Board under Section 120 and Section 124 of the Act. Under sub-section (1), transfer order under Section 127 can be passed by the Director General, Chief Commissioner or Commissioners from one Assessing Officer to another Assessing Officer subordinated to them. Sub-section (2) applies where the Assessing Officer to whom the case is to be transferred is not subordinated to the same Director General, Chief Commissioner or Commissioners of the Assessing Officer from whom the case is to be transferred. This is not a case of a transfer under Section 127 of the Act. This is a case in which the assessee had raised an objection stating that the Income-Tax Officer, Ward-1 (1), Noida should not continue with the ass....
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....ional High Court clearly clinches the issue that if the case is being transferred from one Assessing Officer having jurisdiction over the assessee to another assessing officer who otherwise was not having the jurisdiction in terms of direction of the Board u/s.120 and 124 of the Act, then transfer order u/s 127 is mandatory, without which the jurisdiction of the Assessing Officer cannot be conferred to pass any order. If such a statutory procedure is not followed then there would be a chaos where any Assessing Officer can pass order in the case of any assessee even when he does not have any territorial jurisdiction over that assessee. Thus, we are of the opinion that an order u/s. 127 is mandatory which has to be passed by the competent authority if jurisdiction is transferred from one Assessing Officer to another Assessing Officer who otherwise does not have the jurisdiction over the assessee. 22. However, in this case, the Ld. CIT-DR had brought on record that there is some kind of transfer order which has been passed on 19.02.2016 vide 'transfer order no. 200000047799' wherein the PAN of the assessee has been transferred from Central Circle-20 to Ward-21(1) Delhi. If such an or....
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.... belonging to the same family having registered office at same place and owned by same Ambience group and managed by the same members of the family. Here, it is not a case, where the shares have been acquired by the assessee of some unconnected or outside company, albeit the shares were held beneficially, earlier by the same family in the name of different entity and now by way of this transfer, the shares are again held by the same family but in a different entity. Thus, there cannot be a transaction of any unaccounted money or money laundering going from one hand to another. He submitted that object of introducing such a deeming provision by Finance Bill, 2010 were mainly anti abuse provisions to counter tax evasion mechanism and to prevent laundering of unaccounted money. When the transfer of share is within the same family owned company then there cannot be situation of abuse of provision of law to avoid tax liability including any laundering of unaccounted income. Further, it was purely a bona fide transaction and there is no allegation of the Department that the transaction is being done for tax evasion or for money laundering purpose or for getting the benefit of such mischi....
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....he case of the assessee as the balance sheet referred to in Rule 11U are those which should be audited by the auditors appointed u/s.224 of the Companies Act. Thus, such an audited balance sheet cannot be the basis for determining the FMV of the shares. 27. His next contention was with regard to the certain calculation errors of Rs.10,56,92,728/-, the working of which was given before the Assessing Officer and also given in the paper book from pages 132 to 150 of the paper book. Thus, he submitted that such a mistake should be directed to be corrected as AO has not correctly taken the figures and the amount of Rs.10,56,92,728/- should be reduced. 28. Lastly, on the issue of adjustment in Rule 11UA, he has filed detail written submission. In sums and substance, his contentions are as under: (i) Rule-11UA(1)(c)(b) provides the formula for calculating the FMV of unquoted equity shares on the valuation date. It provides for adopting the assets and liabilities as per the audited balance sheet alongwith notes annexed thereto, as on the valuation date and thereafter to reduce the assets by the items as mentioned in "A" which provides for excluding such assets in the bal. sheets which ....
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....ving effect with the notes appended therein. At times, the amount forfeited is not given as a fact in the financial accounts since in that case any hope / claim for the same gets vanished. b) For interest cost incurred for purchase / development of plots / land / projects capitalized / work in progress. Name of the company Amount Ambiance Pvt. Ltd. 86,83,03,797/- Ambiance Developer & Infrastructure Pvt. Ltd. 52,37,48,009/- Ambiance Tower Pvt. Ltd. 38,63,12,000/- Tropical Infradevelopers Pvt. Ltd. 97,52,270/- Alankar Apartments Pvt. Ltd. 5,63,59,323/- Total 184,44,75,399/ The amounts as above have been given in the notes of the audited balance sheet as on 30.03.15. Nature of this amount was explained that, for the purchase of properties, the funds are borrowed on interest and this interest cost is either capitalized or included in the work-inprogress. The capitalized cost of such properties is shown in the balance sheet and as work-in-progress, as the case may be. This borrowing cost could had been, otherwise, shown and claimed in P&L A/c year to year. In that case, the value of the asset in the balance sheet will appear at the original purchase cost. Similarly, in ....
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.... reported in the notes of the audited balance sheet. Contention by the Revenue on Merits 29. On the other hand, ld. CIT-DR submitted that the contention of the ld. counsel that the aggregate fair market value of all the 26 companies should be taken including the negative value of shares with respect to four companies, is untenable in law. Apart from relying upon the order of the ld. CIT(A), he submitted that the deeming provision of Section 56(2)(viia) are invoked only when, firstly, the shares have been received without consideration; or secondly, shares have been received at a price less than the Fair Market Value. Here, in this case, the deeming provision are attracted only in respect of purchase of shares of 22 companies, because, admittedly the purchase was less than the Fair Market Value, therefore, the claim of the assessee to consider the negative figure of other 4 companies to arrive at aggregate Fair Market Value of all the 26 companies is not admissible. He further submitted that the word used in section is, a share of a company and Fair Market Value of such property. Thus, the intention of the Legislature is to consider the purchase consideration of a share of a com....
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.... actual tax liability to the extent paid as TDS/TCS/Advance Tax] 2. Amount shown in the balance sheet as asset which does not represent the value of any asset including unamortized amount of deferred expenditure [Misc. expenditure and losses not written off] The asset which does not represent the value of any asset including unamortized amount of deferred expenditure [Misc. expenditure and losses not written off] are called fictitious assets in accounting terms. Fictitious assets as the name suggests, are not assets in a true sense. These generally include some onetime heavy expenses which are not considered as an expense only in the year in which they were incurred. Rather, these expenses are shown as expenses over few accounting years. If the entire amount of these expenses is considered as an expense in the year of occurrence, these expenses may result in a big loss in that particular year. So these expenses are spread out over a few years. For example, preliminary expenses. These are expenses incurred at the time of starting the business. If the entire amount of preliminary expenses is assigned to the first year only, it would result in a huge loss in the first year it....
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....unting period is shown in the balance sheet. This is an example of fictitious asset. 9. Fictitious assets are shown in the balance sheet itself and while computing the net worth of a firm, such fictitious asset are reduced from the value of assets. Such fictitious assets are to be computed as per the provisions of the Companies Act. It cannot be left open at the whims and fancies of persons. In fact, the items have been listed which are to be excluded from the liabilities while computing FMV under Rule 11UA. As fictitious assets may be shown under different heads/names in the balance sheet, the Rule 11UA has only mentioned the term "any amount shown in the balance sheet including the unamortized amount of deferred expenditure which does not represent the value of any asset." The said amount is known as fictitious asset' in accounting method. 10. In the Guidance Note issued by ICAI (page no. 103 of Revenue's paper book), the fictitious assets have been defined as under - "6.02 Fictitious Asset- Item grouped under assets in a balance sheet which has no real value (e.g. the debit balance of the profit and loss statement.)" 11. The assessee has claimed different items in th....
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....s given the finding that the claim is bereft of merit. 3. Bad debts The CIT(A) has examined the above claimed in para 5.24 on page 23 of his order. The CIT(A) has held that no evidence has been filed by the assessee in respect of claim of bad debts. 4. Cost of land falling under green area, roads and common area The CIT(A) has examined the above claim on page 23-25 of his order. It is the claim of the assessee that area being used for parks, roads, green area, common area in townships developed by the companies, whose shares were purchased by the assessee during the year, should be reduced on account of unsalable area. The CIT(A) has given the finding that the assessee has not submitted the working of the said area. Further, the CIT(A) has given the finding that the roads, common area parks, green area are integral part of the township projects and are generally included while working super built up area of a unit. The CIT(A) has rejected the claim of the assessee. 5. Damaged electrical material, tiles, marble, hardware etc. The CIT(A) has examined this issue in para 5.28 on page 25-26 the order. The assessee has submitted copy of ledger accounts of ALANKAR APPARTMEN....
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....same group. The deeming provision of Section 56(2)(viia) was brought in the statute as 'anti abuse' provision to prevent practice of transferring the unlisted shares price much below the Fair Market Value. The relevant section brought by the Finance Act, 2008, w.e.f. 01.06.2010 reads as under: "(viia) where a firm or a company not being a company in which the public are substantially interested, receives, in any previous year, from any person or persons, on or after the 1st day of June, 2010, any property, being shares of a company not being a company in which the public are substantially interested,-- (i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property; (ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration: Provided that this clause shall not apply to any such property received by way of a transaction not regarded as transfer under clause (via) or clause (vic) or clause (vicb) or clause (vid) or clause ....
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.... bringing that legislation and resort to purposive construction. Otherwise, general rule is that literal construction has to be given and no one is entitled to add something more than what is stated in the statute by way of supposed intention of the Legislature or go behind the Finance Minister's speech while introducing the section. A deeming provision has to be given strict interpretation and where words of such provisions are clear and unambiguous with regard to its applicability, recourse should not be taken to look behind the object or aid with some other words to interpret the statute other than literal rule. Even if the literal interpretation results in hardship or inconvenience in taxing statute, then also it has to be followed in letter and spirit. The purposive construction can only be resorted when there is any ambiguity in the section or there is contradiction in two provisions of the same statute, in that case then, legislative intent can be looked into. Here, no such ambiguity or contradiction is there in the provision nor has been pointed out before us. The argument of the Ld. Counsel to see the rationale while enacting the provision and examine reasonableness cannot....
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....then clause (viia) is not be attracted, because the statute has clearly provided that this section would be invoked only when difference between the purchase consideration of Fair Market Value of a share of a company is more than Rs.50,000/-. Thus, provisions would be applicable share-wise qua the same company. Besides this, reasoning given by the Ld. CIT (A) on this point as discussed above is reasonable and plausible to which we also agree. Accordingly, such a contention raised by the ld. counsel is rejected. 35. Similarly, with regard to the contention that Rule 11UA is not workable for the reason that the said Rule provides that the audited balance sheets as on the valuation date should be prepared by the auditor appointed u/s.224 of the Companies Act, 1956, whereas, w.e.f. 01.04.2013 Companies Act, 2013 has been enacted for appointment of the auditors in Section 139; at the face of it cannot be entertained. Because, Section 8 of the 'General Clauses Act, 1897' provides as under: (1) "Where this Act, or any [Central Act] or Regulation made after the commencement of this Act, repeals and re-enacts, with or without modification, any provision of a former enactment, then refere....
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....2018. Here in this case, as culled out from the record and also as pointed out by the ld. counsel before us that the balance sheet for all the companies was drawn on the valuation date, wherein the auditor of the company have drawn the balance sheet of each companies on the valuation date which included notes annexed and forming part of the accounts and in such notes, the auditors have qualified the value of assets by making various adjustments which does not represent the real value of the asset. The notes along with the balance sheets have also been incorporated by the Assessing Officer in his order. The Rule 11U defines the balance sheet in relation to any company for the purpose of Rule 11UA in the following manner: "(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 (including the notes annexed thereto and forming part of the accounts) as drawn up on the valuation date which has been audited by the auditor of the company appointed under section 224 of the Companies Act, 1956 (1 of 1956) and where the balance sheet on the valuation date is not drawn up, the balance sheet (including th....
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.... the valuation as per the Assessing Officer and valuation as per the auditors. S.No. Name of Company Remarks Amount (in RS) Note No. of Balance Sheet Valuation as per Assessment Order/AO (A) Valuation as per assessee Excess taken by A.O. (A-B) 1 Tropical Infradevelopers Pvt. Ltd. Interest Capitalised 95,58,038 Note No. D 27,10,740 2,71,812 24,38,928 Work in Progress 1,94,232 97,52,270 2 Ambience Developers & Infrastructure Pvt Ltd Bad Debts 4,08,45,945 Note No. 14 28,33,39,210 54,85,784 27,78,53,426 Business Investment (Assets) 40,13,58,397 Note No. 12 Borrowing cost included in fixed assets which do not represent the value of assets 52,37,48,010 Note No. 8 96,59,52,352 3 Ambience Pvt. Ltd. (previously Ambience Projects & Infrastructu re Ltd) Earnest Money/Advances against plot No. SLC- 3/1 Alpha-II, SLC-4/J, Beta-II, SLC-4/I, Beta-ll &, SLC-3/H, Alpha-ll 77,88,59,157 Note No. 12 64,75,00,927 5,40,94,248 59,34,06,679 Earnest Money/Advances against plot Sl. Nos. 421,27 bit-l at Vishakhapatnam 76,18,79,750 Earnest ....
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....t paid on the value of the land for development. Further, the EDC and fee etc. paid for open area, parks, roads, amenities, facilities and services useable by the residents of the colony / complex is not claimed as a deduction. In the case of Ambience Developers & Infrastructure Pvt. Ltd. it is shown in the balance sheet under the head "business investment" for the only reason that the project of said company is jointly with another company. In case of other 4 companies, since those are their independent projects, therefore, such expenses are shown in their balance-sheets as stock-in-trade. In the audited balance sheets of all the 5 companies as on the relevant date, the auditor, by way of a note has mentioned that the amounts to this extent do not represent the value of said assets. Ld. Assessing Officer and Ld. CIT(A) have rejected such claim of the assessee mainly on the ground that either the assessee has not been able to substantiate; and secondly, there is no provision in the statute/ rules to reduce the value of the asset as shown in the books. 39. One very important aspect which needs to be examined is, whether such kind of an adjustment is permissible under the rule 11UA ....
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....hares; The aforesaid method provides that the fair market value of unquoted shares shall be the value on the valuation date as determined by applying the aforesaid formula. The book value of the assets in the balance sheet has been defined. The manner in which the book value of the asset in the balance sheet has to be determined is given under the head 'A' which has following limbs: - Firstly, the book value of the asset in the balance sheet is to be reduced by any amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income Tax Act; and * Secondly, any amount shown in the balance sheet as asset which does not represent the value of any asset including unamortized amount of deferred expenditure. Ergo, if any amount is shown in the balance sheet which do not represent the value of the asset has to be reduced. 40. In the case of the real estate/construction companies, certain items like construction and development expenses, finance cost, advances made to the suppliers, contractors, unamortized amount of deferred expenditure, preliminary expenses and certain other items which due t....
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....ed by the amount which does not represent the value of the asset. If the auditor has qualified and has clearly stated that certain amount does not represent the value of the asset, then such notes has to be read in the balance sheet as per the mandate of Rule 11UA. Thus, we hold that principally the book value of the asset can be reduced by an amount which does not represent the value of the asset while determining the fair market value of the shares under Rule 11UA(2). 42. Now we will individually discuss the various adjustments which have been claimed by the assessee before the authorities below and also as qualified by the auditors in the notes to the account. First of all, assessee has claimed earnest money/advances against various plots forfeited by the authorities. The details of such non-recoverable forfeited amounts with respect to Ambience Pvt. Ltd. have already been incorporated above. The assessee's contention has been that the earnest money and advance was given to the Government Authorities for the purchase of plot /land in auction, however due to non fulfillment of terms and condition the earnest money paid by the company has been forfeited by the Government Authorit....
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....ed in the value of the asset of the following companies:- Name of the companies Amount (in Rs.) Ambience Pvt. Ltd. 86,83,03,797/- Ambience Developers & Infrastructure Pvt. Ltd. 52,37,48,009/- Ambience Towers Pvt. Ltd. 38,63,12,000/- Tropical Infradevelopers Pvt. Ltd. 97,52,270/- Alankar Apartments Pvt. Ltd. 5,63,59,323/- Total 184,44,75,399/- Ld. CIT (A) has rejected the said contention on the ground that the provision of Rule 11UA talks about the Fair Market Value of the asset and not property or immovable assets and the FMV of the share is determined taking into consideration book value of the asset and the book value of the liabilities. Another contention of the Revenue is that, as per provision of Section 36(1)(iii) interest cost on any business asset is to be capitalized till the date asset is put to use and have also referred to provision of Section 43(1) read with Explanation 8 that the interest relatable to the period after such asset is first put to use same shall not be included in actual cost of the asset. However, nowhere the Assessing Officer was Ld. CIT (A) has found that these assets have been put to use on the date of the valuation. The borrowed cost ....
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....Market Value of shares. 44. In so far as the claim of bad debts is concerned of Rs.4,08,45,945/- in the case of M/s. Ambience Developers and Infrastructure Pvt. Ltd. the same has been stated to be old outstanding rent which had already become debts which had been reduced from the value of the asset by the auditors treating that debtors of that amount are not recoverable as on date. This outstanding rent is pending from last many years even though they have not claimed that as bad debt in the P&L account by writing it off in the books of account. Even if the company has not written off the bad debt, but auditors have found that it is not recoverable for many years and have reduced from the value of asset, then same cannot be held to represent the value of the asset on the date of valuation, Simply because the amount has not been written off as on 31st March, 2015, it does not mean it is to treated as part of value of asset. Accordingly, Assessing Officer is directed to reduce the said amount from the value of the asset while valuing the book value of asset.. 45. Coming to the electrical material, tiles, marbles and hardware damaged but forming part of asset, assessee has submitted....