2024 (12) TMI 1059

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....return of income for A.Y. 2015-16 was filed by the assessee on 16.11.2015 declaring loss of Rs. 79,68,765/-. The case was selected for limited scrutiny under CASS to verify the substantial increase in share capital, large share premium received during the year and low income in comparison to high loans and advances/investment in shares. In the course of assessment, the AO found that the assessee company was incorporated on 24.12.2011 and the company had not started any activity till 31.03.2017. The entire share capital of the company was held by its immediate holding company M/s. Mytrah Vayu (Bhima) Private Ltd. ('MVBPL'). The assessee had brought funds by way of share capital of Rs. 62.5 Crores during F.Y. 2013-14. Against the share applic....

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....l of the assessee was allowed. 4. Now, the Revenue is in appeal before us. The following grounds have been taken in this appeal: "1. Whether on the facts & in the circumstances of the case, the Ld. CIT(A) was right in deleting the addition made u/s 56(2) (viib) of the Act without appreciating that the method adopted for determination of FMV of the equity share by the assessee is not as per the method prescribed under Rule 11UA of the IT Rules. 2. Whether on the facts & in the circumstances of the case, the Ld. CIT(A) was right in deleting the addition made u/s. 56(2)(viib) of the Act without appreciating the fact that as per CBDT Circular No. 22/2019 dated 30-08-2019 the cases where appeal against assessment is pending ....

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....he valuation report based on comparison with one-year actual figure was not correct. He further submitted that the entire share premium was received from the holding company and that the Co-ordinate Bench of this Tribunal in the case of DCIT vs. Ozone India Ltd., [2021] 126 taxmann.com 192 (Ahmedabad-ITAT) had analyzed the deeming provision of Section 56(2)(viib) of the Act and observed that deeming clause requires to be given a schematic interpretation. According to the Ld. Counsel, the provision of Section 56(2)(viib) of the Act was introduced to prevent unlawful gain by issuing company in the garb of capital receipts. He explained that in the present case, since the entire shares were allotted to holding company, there was no change in t....

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....NAV method to determine the FMV of shares. The AO can certainly scrutinize the valuation report submitted by the assessee but for determination of a fresh valuation he has to obtain a report from an independent Registered Valuer / Merchant Banker. Further, the basis had to be DCF method and he cannot change the method of valuation which was opted by the assessee. The Ld. CIT(A) had, therefore, rightly held that the AO cannot adopt his own valuation unless there was an enabling provision in the Act giving powers to the AO to tinker the valuation report obtained from an independent valuer as per the prescribed method under Rule 11UA(2)(b) of the IT Rules. Hon'ble Delhi High Court in the case of PCIT-2 Vs. Cinestaan Entertainment Private Limit....