TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 393
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....d on premium of Rs. 590 only on the basis of valuation report which was not supported by the documentary evidences? 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the disallowance made u/s 56(2)(viib) of the Act without appreciating the fact that there was no conformihl between the projected financials of the company as reported in valuation report with the actual financials for A. Y. 2017-18?. 3. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) is justified in deleting the disallowance made u/s 36(1)(iii) of the Act without appreciating the fact that the borrowed funds were utilised for making non business advances? 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the disallowance made u/s 36(1)(iii) of the Act without appreciating the fact that the borrowed funds were utilised for making new investment in zero coupon redeemable non convertible debentures and not for purpose of business? 5. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of Assessing Officer be restored. ....
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....re issued and served on the assessee. From the perusal of the financial statement of the assessee, it was observed that the assessee has issued 10,00,001 equity shares of Rs. 10 each paid to Shapoorji Pallonji Company Private Limited at a premium of Rs. 590 per share. In pursuance of this offer, the assessee has issued 10,00,001 equity shares at an issue price of Rs. 600 per share. (of which Rs. 590 per share was towards the securities premium). Thus the assessee received a securities premium of Rs. 58,99,99,990. During the assessment proceedings, the assessee was asked to furnish the details of the shareholders from whom the share premium was received. The assessee was also asked to justify the receipt of the share premium along with the necessary documentary evidence. In response, the assessee submitted that it has issued 10,00,001 equity shares of Rs. 10 each fully paid to Shapoorji Pallonji Company Private Limited at a premium of Rs. 590 per share. The assessee also furnished the ledger account, relevant entries in the bank statement, allotment document filed with the ROC and PAN of new shareholders. Further, the assessee provided the copy of valuation report for charging the p....
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....ubmissions of both sides and perused the material available on record. The assessee raised funds through the issue of equity shares to Shapoorji Pallonji Company Private Limited primarily to invest in his business of logistics, warehousing, storage, and ancillary services at the Port which was owned by Dharamtar Infrastructure Private Limited. This was done to increase the business and value of Port. The investment of Rs. 53,76,70,659 was paid to the shareholders of Dharamtar Infrastructure Private Ltd. for acquiring 65% (approx.) of the shares. Prior to the acquisition, the assessee had 35% (approx.) of the shares. With the acquisition of a further 65% (approx.) Dharamtar Infrastructure Private Ltd. became a 100% subsidiary of the assessee. The shares were issued based on the valuation by the Chartered Accountant by using the DCF method which is one of the prescribed methods under section 56(2)(viib) of the Act read with Rule 11UA(2)(b). Before proceeding further, it is pertinent to note the relevant provisions of section 56(2)(viib) of the Act, which reads as under:- "(viib) where a company, not being a company in which the public are substantially interested, receives, in any ....
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....s before the learned CIT(A), the assessee also furnished the fair market value of the shares at Rs. 410.14 per share as per the NAV method. However, it is evident from the record that the AO neither accepted the valuation report as furnished by the assessee to arrive at the fair market value of the shares on the basis of the DCF method nor pointed out any mistake in the valuation report so furnished by the assessee. Rather, in the present case, the AO treated the value of the premium on the shares at Rs. Nil without following any of the methods prescribed under the relevant Rules. The Hon'ble jurisdictional High Court in Vodafone M-Pesa Ltd v/s PCIT, [2019] 92 taxmann.com 73 (Bom.) held that there is certainly no immunity from the scrutiny of the valuation report submitted by the assessee and the AO is 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, however the basis has to be the method adopted by the assessee and it is not open to the AO to change the method of valuation which has been opted for by the assessee under Rule 11UA(2) of the Rules. Therefore, we are of the....
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....eld of accountancy, having regard to the imponderables which enter the process of valuation of shares. The Appellant-Revenue is unable to demonstrate that the methodology adopted by the Respondent-Assessee is not correct. The AO has simply rejected the valuation of the Respondent-Assessee and failed to provide any alternate fair value of shares." 12. Undoubtedly, section 56(2)(viib) of the Act is an anti-abuse provision brought in the statute to prevent the practice of transferring shares of specified company for no or inadequate consideration. However, it is pertinent to note that in the present case, the shares of the assessee were subscribed not by a sister concern or any closely related person but by an outside investor. Further, as noted by the learned CIT(A) in paragraph 3.1.13, by no less than a corporate giant called Shapoorji Pallonji group, whose identity, creditworthiness, and genuineness are not doubted by the Revenue. Therefore, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue deleting the addition of Rs. 58,99,99,990 as share premium under section 56(2)(viib) of the Act. Accordingly, grounds no. 1 and 2 raised in Revenue's appeal ....
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....stments made were clearly not for the purpose of business and profession. It was further held that the assessee has not justified making the investment in zero coupon debentures in PNP Infra Projects Pvt. Ltd. Further, the assessee has not furnished any details as to why the advances/security deposit of Rs. 100,12,02,392 were given and what was the business purpose. The AO further noted that for the year under consideration, the total funds available with the assessee were Rs. 301,33,99,201 and out of this the interest-bearing borrowed funds were Rs. 182,13,62,977. Further, the total interest-free advances to relatives were Rs. 100,12,02,392, and investment in zero coupon debenture amounting to Rs. 42,80,00,000. Thus, the AO held that possibility of the assessee having utilised the interest-bearing funds for the purpose of giving interest-free advances cannot be denied. As the assessee has not given the details of utilisation of the funds, on a pro-rata basis, it was held that 79% of the interest-free advances/deposits/investment to relatives and others were from the interest-bearing borrowed funds. Therefore, out of the total interest-free advances/deposit/investment of Rs. 142,92....
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....ebentures, having a face value of Rs. 10,00,000 each, amounting to Rs. 42,80,00,000 and the balance consideration of Rs. 88,952 was paid in cash to the assessee. As per the assessee, it has recognised the profit arising out of the said transfer agreement amounting to Rs. 5,81,30,080 in the statement of profit and loss account. From the perusal of the financial statement of the assessee, forming part of the paper book on pages 53-54, we find that the assessee made the declaration in respect of transfer of assets and liabilities to PNP Infra Projects Pvt. Ltd. It is evident from the record that after considering the declaration in financial statement of the assessee, the learned CIT(A) deleted the disallowance of interest expenditure under section 36(1)(iii) of the Act in respect of zero coupon debentures. In view of the facts and circumstances as noted above, we find no infirmity in the aforesaid findings of the learned CIT(A) as zero coupon debentures are not an investment by the assessee instead the same is a consideration for the transfer of assets and liabilities to PNP Infra Projects Pvt. Ltd. Accordingly, grounds no. 3 and 4 raised in Revenue's appeal are dismissed. 19. Insof....