TaxTMI 
TaxTMI 
2023 (7) TMI 403
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....F method was incorrect as actual figures of EBITDA for the financial year 2014-15 were available while preparing valuation report but projected figures were adopted without any basis. (iii) The CIT(A) erred in holding that the AO was not justified in changing the method of valuation without appreciating the findings of Hon'ble ITAT, Delhi in the case of Agro Portfolio (P) Ltd vs. ITO, 94 taxmann.com 112 wherein, it was held that where there was no possibility of verifying the correctness or otherwise of the data supplied by the assessee to the merchant banker, in the absence of which the correctness of the result of DCF method could not be verified, there was no option to the AO but to reject the DCF method and go by NAV method to determine the FMV of the shares. (iv) The CIT(A) erred in allowing deduction on account of interest on delayed payment of TDS/TCS without taking into consideration the order of Hon'ble Supreme Court in the case of Bharat Commercial & Industries Ltd, 98 Taxman 151 wherein, it was held that interest on delayed payment of income tax was not an allowable expenditure u/s 37(1) of the Act." 3. Brief fact of the case is that during the year under co....
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....n appeal order the revenue has filed appeal before us by challenging the relief granted on amount of Rs. 3,38,60,465/- and Rs. 2,38,149/- by the ld. CIT(A). 4. The ld. AR filed written submissions which are kept in the record. The ld. AR fully stands in favour of the appeal order. The ld. AR invited our attention in para no. 5.2.7 which is extracted as below: "5.2.7 There are certain other facts of the case that after the incorporation of the appellant company for the purposes of manufacturing of liquor, the bottling commenced in December 2013 whereas distillery started in November 2014, The placement of shares was made on 30/03/2015 and the valuation of the accountant was done on 23/02/2015. In the circumstances, the projections for discounted cash flow method were based on data available for 2 financial years only. There is no major discrepancy in projection as well as adopting of the financial data. I am also in agreement with the contention of the appellant that in case effect of the goodwill as well as appreciation of land value is also adequately taken into consideration, the fair market value per share would touch almost Rs. 190/- much higher than the transacted value of ....
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....t been applied to a company on account of fulfilment of conditions specified in the notification issued under clause (ii) of the first proviso and such company fails to comply with any of those conditions, then, any consideration received for issue of share that exceeds the fair market value of such share shall be deemed to be the income of that company chargeable to income-tax for the previous year in which such failure has taken place and, it shall also be deemed that the company has under reported the said income in consequence of the misreporting referred to in sub-section (8) and sub-section (9) of section 270A for the said previous year.] Explanation. -For the purposes of this clause,- (a) the fair market value of the shares shall be the value- (i) as may be determined in accordance with such method as may be prescribed; or (ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, whichever is higher;"....
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....r is undoubtedly entitled to scrutinise the valuation report and determine a fresh valuation either by himself or by calling for a final determination from an independent valuer to confront the petitioner. However, the basis has to be the DCF Method, and it is not open to him to change the method of valuation which has been opted for by the Assessee. If Mr. Mohanty is correct in his submission that a part of demand arising out of the assessment order dated 21st December 2017 would on adoption of DCF Method will be sustained in part, the same is without working out the figures. This was an exercise which ought to have been done by the Assessing Officer and that has not been done by him. Infact, he has completely disregarded the DCF Method for arriving at the fair market value. Therefore, the demand in the facts need to be stayed." (Emphasis supplied) 6. The AR further argued that in the case of the assessee also, the report has duly been submitted vide DCF method and the ld. AO has applied the Net Asset Value method and computed a different value of share. The ld. AO has not given any logical reason for ignoring the method adopted by the assessee and the valuation of the assessee ....
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....tization) is as under:- F.Y. EBIDTA Actual EBITDA 2014-15 (AY 2015-16) 16.31 12.57 2015-16 (AY 2016-17) 18.20 22.24 2016-17 (AY 2017-18) 17.94 23.82 From the above analysis, it is very much clear that the calculation presented by the assessee is totally different from the actuals. In fact, the base point is at gross variation. Thus, the value submitted by the assessee cannot be relied upon. Hence, the valuation done by the assessee as per Discounted Cash Flow method prescribed in Rule 11UA(b) is not correct and calculation has to be done by method prescribed in Rule 11lUA(a) of the Income Tax Rules, 1962. The Fair Market Value of a share comes to be Rs. 103.90/- as per Rule 11UA(a). However, the assessee has allotted a share at a value of Rs. 147.80/-. Thus, excess consideration received by the company over and above the fair market value per share comes out to Rs. 43.90/-. The total number shares allotted are 7,71,309. Thus, the assessee has received excess consideration of Rs. 3,38,60,465/- (Rs. 147.80-Rs.103.90 = Rs. 43.90 X 771309 = Rs. 3,38,60,465/-) over and above the fair market value of the shares. This amount of Rs. 3,38,60,465/- is taxable as per the pr....
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....ing the data by applying the reverse engineering to the pre-determined conclusions. 16. For all these reasons, we are of the considered opinion that there has not been any possibility of verifying the correctness or otherwise of the data supplied by the assessee to the merchant banker, in the absence of which the correctness of the result of DCF method cannot be verified. This left no option to the AO but to reject the DCF method and to go by NAV method to determine the FMV of the shares. Without such evidence, it serves no purpose even if the matter is referred to the Department's Valuation Officer. We, therefore, do not find any illegality or irregularity in the approach of conclusions are by the authorities below. While confirming the same, we dismissed the appeal as devoid of merits. 17. In the result, the appeal of the assessee is dismissed." 8. We heard the rival submission and relied on the documents available in the record. The assessee has obtained the method for DCF for as calculating the FMV of share. In assessment order without finding any lacuna, the ld. AO has changed the method from DCF to NAV. The ld. AO has only grievance that the data taken on basis of th....