TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 211
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....ivate Limited Company. The company filed return declaring taxable income of Rs. 16,30,372/- on 26.09.2016. Notice u/s 143(2) was issued and the assessment proceedings were carried through ITBA portal of the department. 2. During the year, the assessee issued fresh share capital of 97200 shares of face value of Rs. 10/- each at premium of Rs. 2562/- each share. The valuation of FMV of shares for issue of the shares were done by the assessee as per provisions of Section 56(2)(viib) Explanation a(ii) of the Income tax Act. The Income tax Act gives option to the assessee to arrive at FMV of its shares for issue of fresh capital as per 3 options given as per provision of Section 56(2)(viib). As per this section two options are prescribed as per provisions of Explanation a(i) read with Section 11UA(2) which are a. As per Book Value arrived at as per formula given in Rule 11UA(2)(a) b. As determined as per discounted free cash flow method And 3rd option is as per provision of Explanation a(ii)which is c. By valuing its assets including intangible assets etc. 2.1 The assessee adopted the 3rd option i.e. as per provisions of Exp....
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....s raised doubts about the valuation of the shares as per surmises and conjectures which are not as per law and on facts. 6. The assessing officer did not accept the valuation of un-quoted shares held by the company and adopted the balances as per the assessee's books for the arriving at FMV for allotment of shares. By reducing FMV, the assessing officer recomputed the FMV of the assessee company shares at Rs. 800.39 instead of Rs. 2572/- as adopted by the assessee company thus holding Rs. 1771.61 as excess price per share taken by the assessee on allotment of shares. This made addition of Rs. 17,22,00,492/- to the taxable income of the assessee u/s 56(2)(viib)." 3. Ld. Counsel for the assessee further stated that the ld. CIT(A) has rightly accorded relief to the assessee. Our attention was invited to para 4.3 to para 5 of the appellate order which reads as under: "4.3. In the appeal proceedings, the assessee claimed that the issue price of Rs. 2,572/-, per share, with Face Value of Rs. 10/- and premium of Rs. 2,562/- was arrived after taking a proper certificate under Rule 11UA of the Income Tax Rules, from a Chartered Accountant. In such certificate, dated 02/....
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....luation proposed by the assessee and recomputing such valuation in the assessment order, at a lower value. Now, in case where the valuation of the shares certified by a Chartered Accountant as fair Market Value under Rule 11UA, is used by the company issuing share, there cannot be any difference between the issue price and the Fair Market Value of the shares. And if there is no difference between the issue price and the Fair Market Value, as determined under Rule 11UA, the provisions of Sec. 56(2)(viib) is not attracted at all. Therefore, the AO is directed to delete the addition of Rs. 17,22,00,492/-, made in the assessment order and the appeal of the assessee is allowed." 4. Per contra the ld. DR vehemently argued in favour of the order of the AO. It is the case of the Revenue that the time gap of nine months in the valuation period casts a shadow of doubt on the affairs of the assessee qua the valuation of shares. It was also argued that no reliance can be placed upon the financials of the other investee companies for determining. The ld. DR, therefore, assailed the order of ld. CIT(A). 5. We have heard rival submissions in the light of material available on records. Durin....
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....ines a 'Start-up' as an entity shall be considered as a start-up: (a) Up to a period of seven years for non-biotechnology sector and ten years for biotechnology sector; (b) Its turnover should not have exceeded INR 250 million in any of the financial years since incorporation; (c) It is working towards innovation, development or improvement of products or processes or services, or it is a scalable business model with a high potential of employment generation or wealth creation; (d) It is not formed by splitting up or reconstruction of an existing business. 6. The first argument raised by the ld. Counsel for the assessee is that provisions of Section 56(2)(vii-b) are invokable only when there is an element of any unaccounted income in the transaction. It has been argued that in this case shares have been issued to a sister concern. In support of these contentions reliance was placed upon decision of this Tribunal in the case of IPSAA Holdings Private Limited vide ITA No. 2720/Del/2023 dated 23.07.2025. Reference was made on para 8 to para 12 of the impugned order which reads as under: "8. Further he brought to our notice observations of the Assessing Officer at pages 2 &....
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....ated 15.09.2016 and 25.02.2017. They have valued the shares and determined the premium at Rs. 31 per share and Rs. 100 per share respectively. The Assessing Officer analysed the valuation report and observed that the basic information for valuation of the report was submitted by the assessee to the valuer and these figures are not matching with the actuals. He observed that the assessee has projected net profit at the value which is contrary to the actual at the time of estimations were provided to the valuer and further observed that actual turn over achieved by the assessee is far less. Based on the above observations, he rejected the DCF method adopted by the valuer and proceeded to determine the value of shares based on the Net Asset Value (NAV). After careful consideration of various informations available on record, we observe that no doubt, the assessee has declared negative profit during the year under consideration. However, assessee has projected positive profits while projecting its revenue for the purpose of valuation of its own shares. It is fact on record that assessee has issued shares to its own promoters and it is business norm that whenever they value the shares w....
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....sel for the assessee is that it is mandated by law to adopt a method of its choice. Ld. Counsel argued that the ld. AO found its valuation excessive whereas the same is based upon credible evidence on records. Ld. Counsel has submitted that it has taken the FMV valuation relying upon data available in audited/ published financials of the respective corporate entities. Ld. Counsel argued that the fair market value of the shares has been valued in accordance with the prescription provided in Rule 11U/11UA. It was contended that the law gives it an option to value the shares at book value or fair market value. To arrive at the fair market value of its shares investments it adopted the book value of those shares on the basis of balance-sheet of respective companies. In support of these contentions the ld. Counsel placed on record the financials of the respective companies, namely, M/s PPS Infrastructure Limited; M/s Beldi Jewels Private Limited; M/s Shivani Buildtech Private Limited; and M/s Saksham Apparels Private Limited. In support of its contention the assessee has placed through its voluminous paper book, balance-sheet, P&L account and certificates of all the four companies. Ld. ....