AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (8) TMI 624
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....The holding company got the share value done of the assessee company for transfer of its shareholding in the assessee company to the company viz. ANI Technologies Pvt. Ltd., the holding company of OLA Group. The valuer viz. Ernst and Young Merchant Banking Services Ltd., valued the shares of the assessee company dated 30/11/2017 at Rs. 13.94 per share based on discounted cash flow method. In the valuation exercise, while using the discounted cash flow method, the valuer has projected the sales, expenses, and the profit of the assessee company from December 2017 and the calendar years beginning from 2018 to 2023 with the compounded annual growth rate of 34% of the revenue. As such, the holding company of the assessee transferred its entire shareholding to ANI Technologies Pvt. Ltd., at Rs. 13.94 per share having a face value of Rs. 10 per share. 3. After the transfer of the shares as discussed above, the assessee company issued 14,66,02,662 shares to ANI Technologies Pvt. Ltd., at Rs. 13.94 inclusive of a face value of Rs. 10 and share premium of Rs. 3.94 per share. The assessee accordingly received share capital and share premium from ANI Technologies Pvt. Ltd., for a sum of Rs.....
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.... and ANI Technologies Pvt. Ltd. was between unconnected parties, therefore, the same basis can be adopted for the issue of share to ANI Technologies Pvt. Ltd. 8. The assessee has also submitted that the purpose of introducing provisions of sec. 56(2)(viib) of the Act was to curb the unethical practice carried out by the assessee for bringing unaccounted money in the accounted form in the company. The same was clarified by explaining the provision and the object of the same by the finance minister. 9. According to the assessee, it is like a startup company though the same has not been registered as startup company due to the turnover criteria. But if the objects are seen for the issuance of shares, the company is nothing but a startup company only. 10. Without prejudice to the above, the assessee also submitted that the provisions of sec. 56(2)(viib) of the Act mandates to bring the amount of premium to the tax under the deeming provisions if it is charged more than the fair market value. Therefore, only the amount of share premium exceeding the share market value should only to be considered for the purpose of addition as provided under the deeming provisions of sec. 56(2)....
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....ndamental error pointed out by the AO. Likewise, the AO does not have any jurisdiction to change the method adopted by the assessee. 14. Alternatively, the assessee contended that it is only share premium which can be made subject to the addition under the deeming provisions of sec. 56(2)(viib) of the Act. 15. However, the ld. CIT(A) was not satisfied with the contention of the assessee and confirmed the order of the AO by reiterating the findings contained in the assessment year. The ld. CIT(A) also observed that the project report in dispute was prepared only for the transfer of shares by Delivery Hero to ANI Technologies Pvt. Ltd., and, therefore, the same cannot be adopted for the issuance of shares by the assessee company to ANI Technologies Pvt. Ltd. 16. Being aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us. 17. The ld. AR before us filed a paper book running from pages 1 to 497 and contended that the AO has exceeded jurisdiction by challenging the method adopted by the assessee i.e. valuation of shares from DCF to NAV method. 18. As per the ld. AR, the valuation of the shares made by the assessee was accepted under the Companies A....
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....iib) of the Act. the relevant provision of rule 11UA(2) of Income Tax Rule reads as under: "(2) Notwithstanding anything contained in sub-clause (b) of clause (c) of sub-rule (1), the fair market value of unquoted equity shares for the purposes of sub-clause (i) of clause (a) of Explanation to clause (viib) of sub-section (2) of section 56 shall be the value, on the valuation date, of such unquoted equity shares as determined in the following manner under clause (a) or clause (b), at the option of the assessee, namely:- (a) the fair market value of unquoted equity shares = (A - L)/ (PE) X (PV) Where, *********************** (b) the fair market value of the unquoted equity shares determined by a merchant banker ^2[***] as per the Discounted Free Cash Flow method.] 20.2 From the perusal of the above rule, it is transpired that option to choose the method provided under clause (a) or clause (b) is available with assessee. Admittedly, the method adopted by the assessee i.e. DCF method for determining fair market value was one of the methods prescribed under the provisions of section 56(2)(viib) read with income tax rule 11UA of Income Tax Rule. Th....
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....galore-Trib), the relevant observation of the coordinate bench reads as under: 14. In nutshell, our conclusions are as under:- (1) The AO can scrutinize the valuation report and the if the AO is not satisfied with the explanation of the assessee, he has to record the reasons and basis for not accepting the valuation report submitted by the assessee and only thereafter, he can go for own valuation or to obtain the fresh valuation report from an independent valuer and confront the same to the assessee. But the basis has to be DCF method and he cannot change the method of valuation which has been opted by the assessee. (2) For scrutinizing the valuation report, the facts and data available on the date of valuation only has to be considered and actual result of future cannot be a basis to decide about reliability of the projections. (3) The primary onus to prove the correctness of the valuation Report is on the assessee as he has special knowledge and he is privy to the facts of the company and only he has opted for this method. Hence, he has to satisfy about the correctness of the projections, Discounting factor and Terminal value etc. with the help....