TaxTMI 
TaxTMI 
2022 (8) TMI 1468
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....Ld. CIT(A) was correct in admitting additional evidence u/s 46A without affording the proper opportunity to AO? 4. Whether the CIT(A) has not correct on facts and circumstances on deleting the addition made by the AO on account late deposit of employees' contribution towards PF under Section 36(1)(va) of the Income Tax Act, 1961? 5. Whether the CIT(A) has not erred in deleting the addition made by the AO on account of interest on delay payments of indirect tax liabilities without appreciating the fact that the same is penal in nature? 6. The appellant craves leave, to add, alter or amend any ground of appeal raised / above at the time of the hearing." 3. For the sake of brevity, we are deciding this appeal ground- wise. 4. Ground No. 1 & 2 relates to deletion of the addition of Rs. 6,25,44,292/- made u/s 56(2)(vii)(b) of the Act by the Ld. Commissioner by holding the DCF method is in place, which was rejected by the AO being not backed by scientific method or by any data. 4.1 The Assessee in the instant case adopted DCF method on the basis of report determining the fair market value by Accountant as per the discounted free cash flow method. While perusing the said repo....
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....low method. The assessee in accordance with the aforesaid provision has placed on record the report of an accountant determining the fair market value of unquoted equity shares as per the discounted free cash flow method. The Assessing Officer to that extent has not disputed the compliance of condition of furnishing a report determining the fair market value by Accountant as per the discounted free cash flow method. 6.4 The whole case made out is based on the analysis of the said report in as much as that as per the said report, the figures adopted in the financial year 2014-15, 2015-16 do not match with the actual performance of the company and therefore, the Assessing Officer was of the opinion that the said report cannot be relied upon and as such, the entire premium in excess to the book value has been brought to tax as income of the assessee According to the Assessing Officer, during the financial year 2014-15, profits after tax was Rs. 45,15,921/- whereas as per the report, the said profits was adopted at Rs. 3,52,86,156/-. Likewise, the profits after tax for financial year 2015-16 was adopted at Rs. 1,84,45,627/- whereas as per the actual, there was a loss of Rs. 63,23,03....
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....mpany. It uses the concept of the time value of money. All cash flows expected at a particular point of time are estimated and discounted by using cost of capital to determine the present value. 6.8 To an investing company, investing in shares of a company at a particular cost must be a good business idea and for it, DCF analysis can be done by it. 6.9 The actual performance may be varied because of many extraneous factors which may not be present at the time of the valuation date. Thus, an onus cannot be cast upon the appellant to justify the difference which has resulted post the valuation date. What is important is the basis of projection and the macro and micro factors as appearing on the date of valuation. 6.10 The DCW relies on the market, which may change, sometimes, dramatically and small changes in inputs can result into large charges in the value of a company but the important thing here is that inspite of its inbuilt shortcomings, it is used as an important tool or method widely used to value a project or a company and the very fact that IT Act gives an option to assessee to determine the value of its shares u/s 56(2)(viib), the same cannot be rejected merely on....
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.... therefore, the ld. Commissioner has rightly taken the decision on the issue in hand and thus, does not require any interference by this court. 4.5 We have heard the parties and perused the material available on record and given thoughtful consideration to the facts and circumstances of the case and determination made by the authorities below on the issue in hand. We observe that the Assessee has adopted one of the method available for valuing its shares u/s. 56(2)(viib) of the Act, on the basis of the valuation report certified by the Ld. Chartered Accountant, which is not only based upon scientific valuation and financial position for the next seven years in the normal market/business scenario but also prepared in accordance with the prescribed Rules as applicable thereto. The Assessing Officer rejected the method adopted by the Assessee mainly on the ground that figures adopted in the F.Y. 2014-15 and 15-16 did not match with the actual performance of the company, whereas varying of actual results depends upon various marketing/economic/social conditions and even otherwise, projections in the instant case, on the basis of which the valuation was determined has been made while ....
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.... passed the Hon'ble Kerala High Court in the case of Commissioner of Income Tax, Cochin Vs. Antony Dynamic & Shaji (Citation not mentioned by AO) wherein it is held that "so far as employee's contribution is concerned, Assessee is entitled to get the deduction amounts as provided under section 36(1)(va) only if amounts so received from employee is credited in specified account within due date as provided under relevant statute", disallowed the sum of Rs. 2,04,120/- and added the same to the total income of the Assessee. 6.1 The Assessee being aggrieved also challenged the said disallowance/addition before the ld. Commissioner. 6.2 The ld. Commissioner with regard to CBDT Circular No. 22/15 which was relied upon by the Assessing Officer, held that the circular cannot be conclusive and cannot override the judicial decisions as held in Geep Industrial Syndicate Ltd. vs. CBDT (1987) 166 ITR 88(Del) and CIT vs. Hero Cycles (P) Ltd. (1997) 228 ITR 463(SC). 6.3 The Ld. Commissioner while relying upon the judgments passed by the Hon'ble Punjab & Haryana High Court in the case of CIT vs. Hemla Embroidery Mills (P) Ltd. (2014) 366 ITR 167 (P&H) and by the Hon'ble Delhi High Court in the c....
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....d contended that the interest so paid are allowable deductions since they are paid in the ordinary course of business and are not opposed to the public policy, since they are compensatory in nature being civil liability. 7.2 The ld. Commissioner by considering the issue in hand observed that there is nothing on record to suggest that these payments of interest on sales tax and Service tax were penal in nature. The ld. Commissioner also quoted the judgments of the Tribunal in the case of DCIT vs. Messee Dusseldorf of India Pvt. Ltd. (2010) 129 TTJ 81(Del) and in the case of Remfry & Sugar Consultants Pvt. Ltd. vs. ACIT (ITA No. 5887/Del/2011), wherein it was held that interest on service tax is compensatory in nature and has the same characters as service tax and therefore, it is an allowable deduction. Further, the Hon'ble Apex Court in the case of Prakash Cotton Mills P. Ltd. vs. CIT (1993) 201 ITR 684, held that where the payment of interest is automatic for the delayed payment, the imposition is compensatory in nature. The Hon'ble High Court of Himachal Pradesh in the case of CIT vs. H.P. State Forest Corporation (2010) 320 ITR (HP) while relying upon the judgments passed by th....