2023 (8) TMI 1116

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.....2018, passed by the Income Tax Appellate Tribunal [in short, "Tribunal"]. 3. The Tribunal, via the impugned order, set aside the order passed by the Commissioner of Income Tax (Appeals) [in short, "CIT(A)"] dated 16.10.2017, whereby he had refused to delete the addition amounting to Rs. 11,84,46,336/-, made by the Assessing Officer (AO). 4. The record shows that the AO made the addition on account of the difference in value of the shares purchased by the respondent/assessee. 5. The record also reveals that the respondent/assessee had purchased 48% of the equity of a company going by the name Tuff Engineering Pvt. Ltd. (TEPL), from three entities, the details of which are given hereunder: Sl.No. Particulars Number of Share....

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....014-15, the formula which obtained under Rule 11UA of 1962 Rules required calculation of the fair market value, inter alia, by taking into account the book value of the assets shown in the balance sheet. The relevant part of Rule 11UA is extracted hereafter: "Determination of fair market value. 11UA.[(1)] For the purposes of section 56 of the Act, the fair market value of a property, other than immovable property, shall be determined in the following manner, namely,- (a) X X X (b) X X X (c) valuation of shares and securities,- (a) X X X [(b) the fair market value of unquoted equity shares shall be the value, on the valuation date, of such unquoted equity shares as determined in ....

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....bilities, other than ascertained liabilities; (vi) any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares;" [Emphasis is ours] 12. It is not in dispute that the formula prescribed in Rule 11UA of the 1962 Rules underwent a change, which resulted in the fair market value of unquoted shares being calculated by, inter alia, taking into account, inter alia, the value of assets such as immovable property, which was adopted by "any authority of the government" for the purposes of payment of stamp duty. After the said change became effective, i.e., from 01.04.2018, Rule 11UA read as follows: "Determination of fair market value. 11UA.[(....

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....the following amounts, namely:- (i) the paid-up capital in respect of equity shares; (ii) the amount set apart for payment of dividends on preference shares and equity shares where such dividends have not been declared before the date of transfer at a general body meeting of the company; (iii) reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation; (iv) any amount representing provision for taxation, other than amount of income-tax paid, if any, less the amount of income-tax claimed as refund, if any, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable the....