TaxTMI 
TaxTMI 
2023 (12) TMI 702
X X X X Extracts X X X X
X X X X Extracts X X X X
....lved in such share conversion. 3. The Ld CIT (A) erred in deleting the addition as the DCF (Discounted Cash Flow) valuation used by the assessee was done with fictitious figures having no correlation with actual affairs of the assessee company. 2. The brief facts of the case are that the assessee is an Indian company engaged in the business of generation and distribution of electricity and owns a Hydro Electric Project in Chanju, Himachal Pradesh; that for the relevant year, the assessee filed return of income on 18.10.2018 under section 139(1) of the Income tax Act, 1961 (in short 'the Act') declaring loss of Rs. 67,15,30,280/-; that the assessment in the case of the assessee was completed vide order dated 12.04.2021 passed under section 143(3) read with sections 143(3A) & 143(3B) assessing total income of the assessee at Rs. 135,36,85,457/- after making addition of Rs. 202,50,00,000/- u/s 56(2)(viib) of the Act, alleging that the assessee had issued equity shares at a premium which is in excess of the fair market value of shares. On appeal, the CIT(A) deleted the addition made by the assessing officer. Aggrieved, the department is in appeal. 3. The ld. DR, challengi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....apacity as block of fixed assets "remains at Rs. 631.20 Cr. from F.Y. 2017-18 To "F.Y. 2028-29 therefore, the scale of business of company is constant throughout the projected tenure. 6. The ld. DR has further contended that Rule 11U and 11UA of the Rules give the assessee a choice to adopt any method between (A-L)*PV/PE method or DCF method; that there is no dispute as to the suitability of DCF method for determination of value of shares as the same is approved as a valid method of valuation by the Act and the Rule; that it is a matter of fact that the DCF uses estimation of future cash flows. While genuine estimation can certainly qualify as a valid valuation, note needs to be taken of imaginary and fictitious estimation having no correlation with actual affairs of the assessee for arriving at premeditated figures of share value. The Act presumes that the DCF has been done bona fide. DCF takes into account estimation. It goes without saying that such estimation cannot be a fictitious figure invented and coined only to arrive at a premeditated figure of share value; that the assessee has arrived at a value of Rs. 106/- per share which is at huge variance with value of Rs. 8.54 as....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... In the case of McDowell and Co. Ltd. [1985] 154 ITR 148. As regards the decisions quoted by the assessee to justify that AO cannot preclude the assessee from adopting the valuation method of its choice, it is stated that this is a undecided legal issue which has not attained finality. Therefore, in absence of valid arguments by the assessee to justify the valuation adopted by it for issuing equity shares at a premium, AO is not bound to accept the valuation offered by assessee. 10. The ld. DR has, submitted that therefore, the order of the ld. CIT(A) having been wrongly passed, the same be set aside and cancelled and that passed by the AO be restored, upholding the addition made by the AO. 11. On the other hand, ld. Counsel for the assessee has contended that during the course of assessment proceedings, the Assessing Officer issued show-cause notice dated 22.03.2021 incorporating draft order wherein, merely on comparison of the financial projections used for DCF valuation with the actual financial results for certain period, the Assessing Officer treated the valuation of shares as per DCF method as fictitious, bogus and sham, thereby rejecting the valuation report and determinin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s per DCF method contending that no money/consideration was actually received by the assessee on conversion of loans to shares, after a conversion of the partnership firm of the assessee company, and that thereby, the provisions of Section 56(2)(viib) of the Act are not applicable. The ld. Counsel for the assessee has submitted that Section 56(2)(viib) of the Act provides for taxation, if the company receives any consideration in excess of fair market value of shares. That the assessee has not received any money/ consideration on issuance of shares; the shares have been issued in lieu of already outstanding loan received from existing shareholders itself. It was reiterated that the assessee company came into existence on 23.03.2017 by conversion of the Firm. All the partners of the Firm became shareholders of the company. The Firm was also enjoying substantial amount of loan facility from its partners, namely, SBIPL and SBEPL granted from time to time vide loan agreement(s) dated 01.07.2010. It was upon conversion of the firm to Company that the existing loans were converted into equity shares and thereby the assessee issued 2,25,00,000 equity shares of Rs 10/- each at premium of R....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it of which are taxable under the specific head of income". The said circular, it is respectfully submitted, further fortifies the contention of the assessee that the provision of section 56(2)(viib) of the Act arc not applicable on genuine business transaction without there being any evidence stating otherwise. 30. In view of the aforesaid, in absence of any money/ consideration flowing to the assessee company on issue of shares and keeping in mind the avowed objective behind introduction of section 56(2)(viib) of the Act, the said section has no application. In that view of the matter, addition made by the assessing officer under section 56(2)(viib) of the Act is liable to be deleted at the threshold, on the said ground itself. 31. It is further submitted that once the transaction is tested by the tax department and the assessing officer is satisfied that the transaction is a genuine business transaction, i.e., without any clement of tax avoidance, then, there is no requirement to further test FMV of issue of shares at premium, applying provisions of section 56(2)(viib) of the Act. 13. Regarding the Valuation Report obtained by the assessee from the technical expert being....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in ITA No. 1495/Ahd/2007 (Ahd. Trib.) Sosamma Paulosc vs. JOT: 79 TTJ 573 (Coch.) 8. Rameshwaram Strong Glass (P.) Ltd v. ITO: |2018| 172 ITD 571 (Jaipur) 14.1 So far as the action of the AO in substituting the method of valuation being allegedly beyond jurisdiction, the ld. Counsel for the assessee has contended that while section 56(2)(viib) of the Act intends to tax the consideration received for issue of share which is in excess of fair market value of such shares, Rule 11 UA(2)(a) & (b) of the Rules provide two methods of valuation for ascertaining FMV of unquoted equity shares (i) Discounted Cash Flow (DCF) and (ii) Net asset Value (NAV) method. The assessee, it is submitted, has option to choose any of the aforesaid two methods. It was further contended that the valuation of shares of the assessee company has been undertaken using the DCF method based on projected financial position for the next 12 years; that Discounted Cash Flow Method is the most accepted international methodology for valuing an enterprise on a going concern basis and for determining the value of the holding of an investor; that Investors are interested in ascertaining the present value of their inv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of some events and circumstances that do not occur as expected or are not anticipated; market conditions are changing rapidly due to fast changing technology and also due to changing Government policies. Actual results will, therefore, always differ from the forecast and sometimes the difference may be material. To put it differently, considering that the DCE Method is essentially based on projections (estimations), the projections cannot be compared with the actuals so as to expect the same figures as were projected. Accordingly, the projections under DCF method have to be scrutinised with the facts and data available on the date of valuation and not by comparison with the actuals. In that view of the matter, variation between the projections and the actual results achieved cannot be the basis for disregarding/rejecting the valuation as per DCF method. 17. For the proposition that the FMV of a share determined as per the DCF method and duly supported by the Valuation Report of the ld. CIT(A) cannot be rejected merely on the ground that the valuation of the equity shares was based on projection of revenue which did not match with the actual reviews of subsequent years. Reliance ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....used for valuation on the ground that the same are not corroborated by the actual financial results for few years, viz., FY 2017-18, 2018-19 and 2019-20. 20. In this regard, it is submitted that profit forecast necessarily depends upon subjective judgment. It is always assumed that the business continues normally without any disruption due to internal/ external occurrence. The forecast is based on present circumstance s, as to most likely set of conditions and the most likely course of action. It is usually the case that some events and circumstances do not occur as expected or arc not anticipated. For that reason, actual results achieved in future cannot be a basis to decide about reliability of the projections. 21. Projection of cash flow is based on projected fund flow and profit and loss account, in a new-industry, as in the present case of the assessee, the projection has to be made before commencement of actual operation. Thus, projection has to be based on the norms of the industry. On the basis of proposed installed capacity, cost of the project and its funding, i.e., equity & debt is ascertained. Quantum of electricity generation and its sale value is determined after co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the eligibility to avail CER was reduced from 50 MW to 25 MW. Thus, the assessee later became ineligible. O & M Expenses Operation and maintenance expenses were estimated to 1% of the cost of fixed assets with annual increase of 5.72% Depreciation It is worked out on the basis of rate of depreciation provided under Indian Companies Act. Finance Cost interest on working capital and term loan has been worked out considering rate of interest then charged by the banks, i.e., 10.35% for working capital and 12,65% for term loan. As regards unsecured loan, the lenders were the shareholders and were not charging any interest in the past; hence not considered. Current Tax Company was eligible for tax holiday u/s 80IA, however was liable for MAT which has been worked out on the basis of then prevailing rate. 23. Detailed working sheet of assumptions (reference has been made to pages 70-73 of PB) based on which projections were made, is enclosed together with copy of Power Purchase Agreement with Knowledge Infrastructure Private Limited (reference has been made to pages 74-81 of PB) and copy of sanction letters from banks evidencing rate of interest (reference has been made to pages ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... final tariff at Rs 5.98 per unit resulting into likely gain of Rs 12.16 Crores for F.Y. 2017-18 and Rs 4.80 crores in F.Y. 2018-19. This has affected the actual PB f considered for F.Y. 2017-18 & 2018-19. Relevant extract of order of CSERC approving the tariff of Rs. 5.98 per unit is available at pages 92-112 of PB. 25. It was submitted that the assessee has borrowed more than Rs. 330 crores from banks, finance cost was assumed adopting interest rate of 12.65 % p.a whereas interest was paid @ 12.71 % pa. during F.Ys 2017-18, 2018-19 and @ 13.05 % in FY. 2019- 20. It has resulted in payment of excess interest than projected at Rs 3.77 crores. Rs. 4.01 crores and Rs. 4 crores for FY. 2017-18, 2018-19 and 2019-20 respectively. Further, the implied allegation that the valuation has been inflated through profit projections in DCF valuation is baseless, as is evident from the following: The trend in results as estimated while making DCF calculations is corroborated with the actual results inasmuch as the PBT was expected to be loss for F.Y. 2017-18 and 2018-19 and profit of FY 2019-20 which has actually happened dehors the quantum. In fact, the actuals revenues for F.Ys 2018-19 and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bound to differ with the projections and therefore, in such a situation to avoid any allegation of professional negligence, the valuer always adds a disclaimer/caveat qua the projections, which the valuer has no means to verify; that the same does not mean that the value assigned by the valuer is unreliable or unrealistic, especially when the valuation has been done with widely and internationally accepted methodology. It was submitted that there are valid reasons for variation between the projections and actual and if the above valid reasons are considered, the variation between the projected PBT and actual PBT stands duly explained and there will be no room to disbelieve the projections which were the basis for valuation under DCF method. It was submitted that the estimation which formed the basis of valuation should not be treated as fictitious, sham/ bogus and the value of share assigned by the valuer deserves to be accepted for the purpose of section 56(2)(viib) of the Act. 26. We have heard the parties and have perused the material available on record. The undisputed facts are that the assessee company came into existence by conversion of a partnership firm into a Private Li....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eference pages 47-56 of PB) were entered between the latter (assessee) and the lenders (partners/ shareholders), primarily for novation of loans from the Firm to the assessee company. Vide the said agreements, the shareholders agreed to grant/novate loan in favour of the assessee company; further, a covenant in the said agreement provided for conversion of loan to shares of the assessee company, at the option of the lenders/ shareholders. 27.2 In pursuance of the aforesaid loan agreement(s), the pre-incorporation loan given by the erstwhile partners (now shareholders) were converted into shares of the assessee company, by issue of fresh equity shares of Rs 10/- each at premium of Rs. 90/- per share (total Rs. 100 per shares) during the relevant year. A copy of the Valuation Report obtained by the assessee from its Chartered Accountant has been filed at APB 57-69. 27.3 During the course of assessment proceedings, the Assessing Officer issued show-cause notice dated 22.03.2021 incorporating draft order wherein, merely on comparison of the financial projections used for DCF valuation with the actual financial results for certain period, the Assessing Officer treated the valuation of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of financial statements which was far removed from the actual business and financial realities of the assessee company. (iii) The AO referred to the decision of Hon'ble Supreme Court in the case of McDowell & Co. Ltd. , 154 ITR 148, CIT vs. Durgaprasad More 82 ITR 540, CIT Vs. Sri Meenakshi Mills Ltd., 63 ITR 609 and concluded that the DCF valuation used by the assessee was bogus and sham and has no connection with the real figures. (iv) The AO noted that on conversion of the firm into company on 23.03.2017, all the partners became shareholders and unsecured loans given by the erstwhile partners were converted into equity shares at a premium Thus, there was intent behind adopting DCF method of valuation. Finally, it was concluded that DCF method of valuation was colourable device to avoid tax and made addition of Rs. 202,00,00,000/- u/s. 56(2)(viib) of the Act. In the appellate proceedings, the appellant has enclosed the submission made during the assessment proceedings and countered the AO's findings and conclusions in the assessment proceedings by following arguments:- 1. The appellant has referred to the provision of Section 56(2)(viib) and contended that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... valuation of DCF method, it is contended that the choice of valuation method is available to the assessee (NAV or DCF) as per provision of Rule 11UA of IT. Rules and the AO substituting the method of valuation by NAV is completely beyond jurisdiction and invalid. The appellant relied on the decision of Bombay High Court in the case of Vodafone M-Pera Ltd. Vs. DCIT, 164 ITR 257, wherein the Hon'ble Court held that the AO cannot change the method adopted by the assessee for share valuation by DFC method which was violation of Rule 11UA. The appellant has referred to similar decision of Mumbai ITAT, Bangalore, ITAT Delhi ITAT to emphasize that the AO could not have substituted the- assessee's choice of method of valuation as mandated by Rule 11UA of IT. Rules. (v) The appellant has referred to the decision of CIT Vs. WA Hotels Pvt. Ltd., 276 Taxmann 330 (MAD) to support its contention that variation between projection and actual results cannot be the ground for rejection of DCF method to value shares. In the case of VVA Hotels, Hon'ble Madras High Court held that unless the AO is able to bring out any evidence of abuse of benevolent provision with an intention to defra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of existing partners of erstwhile firm was converted into the shares of the appellant company. Thus, prima facie, there is no justification for the AO to apply Section 56(2)(viib) of the Act in the appellant's case. The said consideration in the form of unsecured loans were received from the partner of the erstwhile firm in the year 2010 (as evidenced from loan agreement) and the AO could not bring out any material facts to show that such conversion of loans to equity shares was a ploy to defraud revenue of the tax on such transaction. In fact, the loans received in earlier years also got tested through scrutiny assessments completed for assessment year 2013-14, 2014-15, 2016-17 and 2017-18 in the case of the erstwhile firm. Thus, it can be concluded that the AO has not made out any case that the share conversion by the appellant led to defrauding revenue of its due taxes. Thus, firstly the amount is not received in the relevant previous year makes the applicability of S.56(2)(viib) invalid in the case of the appellant and secondly, the legislative intent to arrest abuse of tax laws to defraud revenue is also not available in the current facts of the case as the receipt of lo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....parent that there is no case of application of Section 56(2)(viib) to the facts of appellant's case where pre-existing unsecured loans of partners/shareholders were converted into equity shares at premium and the facts of assessment order do not indicate any case of tax abuse involved in such share conversion. Even the AO's decision to substitute DCF method of share valuation by NAV method is not in accordance with the Rule 11UA of IT. Rules. Accordingly, addition of Rs 202,50,00,0007- u/s. 56(2)(viib) of the Act is hereby deleted. 30. It is, thus, seen that the ld. CIT(A) has observed that it is undisputed fact that the appellant did not receive any consideration for allotment of shares in the previous year relevant to current assessment year. The AO has not discussed this fact neither countered this contention of the appellant. It is a clear fact that the erstwhile partners of the erstwhile Firm (converted into appellant company) had given loans to the said firm which was converted into share capital of those partners becoming the shareholders. The AO has mentioned in the assessment order that the loans outstanding as on 01.04.2017 were converted into share capital. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....editalpha Alternatives Investment Advisors Pvt. Ltd. (supra), the Hon'ble Mumbai Tribunal held that the AO can question the basic assumptions made by the valuer and if those are unreasonable, adjust the valuation so claimed at, but cannot substitute the method of valuation as discretion was given to the assessee. In the current case, I find that the AO has not found any specific error in the assumptions of projected figures neither adjusted the same with different valuation by the DCF method itself. Rather, the AO rejected DCF method and proceeded to value shares by NAV method merely on the ground that there was huge difference in projected figures and actual results available for some years. The Courts/tri decisions have held that the rejection of appellant's method of valuation is not permitted by the provision of Rule 11UA(2). In view of the appellant's rebuttal of AO'S defects in valuation and detailed charts and basis of assumption explained by the appellant as well as findings in the decisions of various courts/tribunals on this issue referred by appellant, i do not find any reason to revisit the DCF valuation by the appellant so as to re-adjust the same. Even....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Act prescribes incomes which are not to be excluded from the total income under the Act and shall be chargeable to income tax under the head 'Income from Other Sources'. Clause (viib) of section 56(2) prescribes one such income, as follows; '56(2). In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes shall be chargeable to income-tax under the head "Income from other Sources" namely:- (i) to (viia) (viib) where a company, not being a company in which the public are substantially interested, receives, in the previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares... ' 36. Thus, as per section 56(2)(viib), the aggregate consideration received in excess of the fair market value of the shares to be issued, where the consideration received exceeds the face value of such shares, is to be charged to tax as income from other sources. 37. 'Fair market value' of the share s, for the purposes of section 56(2)(viib), is defined b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther than immovable property, in the nature of unquoted equity shares, is to be determined in the manner provided in rule 11 UA(l)(c)(b), as follows: '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).... (b).... (c) valuation of shares and securities, - (a) ...... (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 the following manner, namely:- the fair market value of unquoted equity shares =(A+B+C+D -L) x (PV)/(PE), where, A= book value of all the assets (other than jewellery, artistic work, shares, securities and immovable property) in the balance-sheet as reduced by,- (i) any amount of income-tax paid, if any, less the amount of income-tax refund claimed, if any; and (ii) any amount shown as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset; B = the price which the jewellery and artistic work would fetch if sold in the open market on the basis of the valuation repor....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... A = book value of the assets in the balance-sheet as 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 any amount shown in the balance-sheet as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset; L - book value of liabilities shown in the balance-sheet, but not including 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 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, to the extent of the excess over the tax payable with reference to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The assessee. on the other hand, exercised the option made available by rule 11UA(2), and arrived at the market value of its unquoted shares on the basis of the Discounted Free Cash Flow Method, or the DCF Method, as provided in rule 11UA(2(b). In the Reply dated 23.3.2021 (APB-3) to the Show Cause Notice issued by the PCIT under section 263 of the Act, the Assessee stated that (para 1 of the Reply): "As per rules 11 and 11UA, a valuation report was obtained from a Chartered Accountant for the purpose of valuation of equity shares. The valuation report was already provided to the Assessing Officer for the purpose of assessment. As per the valuation report the fair market value of shares was arrived at Rs. 1,087. The valuation report has been attached herewith for your reference. " 45. In the order under appeal, the Id. PCIT has observed that the Assessee had stated in its Reply that the valuation report had already been supplied to the A.O. and the fair market value of each share was arrived at Rs. 1,087/- as per the Valuation Report of the valuer; that this stand of the Assessee was not acceptable; that the fair market value of the shares, as per rules 11U and 11UA of the Rul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....opted at the Assessee's option; that nevertheless, the Commissioner had not dealt with the change in the method of valuation by the Assessing Officer, which change had resulted in the demand; that it was not open to the Assessing Officer to change the method of valuation which had been opted for by the Assessee: that in fact, the Assessing Officer had completely disregarded the DCF Method for arriving at the fair market value; and that therefore, the demand needed to be stayed. 47.1 In 'Rameshwaram Strong Glass (P.) Ltd. Vs. ITO', [2018J 96 taxmann.com 542 (Jaipur-Trib.), the Assessee company issued 1,40,000/- shares having face value of Rs. 10 each, at a premium of Rs. 60 per share. The Assessee had determined the fair market value of the shares on the basis of the DCF Method, in accordance with rule HUA(2)(b) of the Rules read with section 56(2)(viib) of the Act. The Assessing Officer rejected such market valuation and determined the fair market value of the shares on the basis of the NAV Method. The AO found that the calculation of the share premium was not in accordance with rule 11UA of the Rules, and after referring to Rule 11UA (2)(b), the fair market value of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....regarding the legislative intent which has given the Assessee an option to choose any one of the two methods of valuation; that when the law has specifically provided different methods of valuation and the Assessee exercised an option by choosing a particular method, changing that method would go beyond the powers of the Revenue Authorities; that permitting the Revenue Authorities to do so would render clause (b) of rule 11UA(2) nugatory and purposeless; and that thus, to this extent, the action of the taxing Authorities was not justified. It was held that the Assessee had all the right to choose a method, which could not be changed by the Assessing Officer. 47.5 It was further observed by the Tribunal that coming to the aspect whether the Assessee had complied with the conditions laid down under rule 11UA(2)(b), it was clear that to comply with this rule, the Assessee was required to obtain a certificate of a Merchant Banker or a Chartered Accountant and to base the valuation on the DCF Method only; and that to exercise the option under this clause, the Assessee was not to be subjected to the fulfillment of any other condition, except these two, which the Assessee had done. 47.6....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n value in place of the value determined; that the Income Tax Department cannot sit in the armchair of the businessman to decide what is profitable and how business should be carried out; that commercial expediency has to be seen from the point of view of the businessman; that strategic investments and risks are undertaken for appreciation of capital and larger returns, and not simply dividend and interest; that any businessman or entrepreneur visualises the business based on certain future projections and undertakes all kinds of risks; that it is the risk factor alone, which gives a higher return to a businessman, and the Income Tax Department or Revenue official cannot guide a businessman as to in which manner risk has to be undertaken; that such an approach of the Revenue has been judicially frowned upon by the Apex Curt on several occasions; that the Income Tax Rules provide for two valuation methodologies; that one is the assets based NAV Method, which is based on actual numbers as per the latest audited financials of the Assessee Company, whereas in the other method, that is, the DCF Method, the value is based on estimated future projection; that if the investment has been ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Discounted Cash Flow Method (the DCF Method), which was appropriately followed by the Respondent-Assessee. 48.2 Dismissing the appeal filed by the Department, the Hon'ble High Court observed, inter alia, that the shares were issued based on the valuation report received from the prescribed expert, i.e., a Chartered Accountant, who used the DCF Method, which is one of the methods stipulated under section 56(2)(viib) read with rule 11lUA(2)(b); that based on the valuation report of the Chartered Accountant, the Assessee issued shares to various equity partners at a premium; that the test laid down by the Courts for interfering with the findings of a valuer was not satisfied in that case, as the Respondent- Assessee had adopted a recognised method of valuation and the Appellant-Revenue had been unable to show that the Assessee had adopted a demonstrably wrong approach, or that the method of valuation was made on a wholly erroneous basis, or that it had committed a mistake going to the root of the valuation process; that the Tribunal had followed the dicta laid down by the Hon'ble Supreme Court in matters relating to the commercial prudence of an assessee relating to valuatio....