TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 1149
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....alue Rs. 10/-. Total amount-Rs. 8,42,375/- (Including premium of Rs. 63.25 per equity share). b) Savegenie E Commerce Pvt. Ltd.- (Foreign Company): 70,500 equity shares of Face Value -Rs. 10/-. Total amount Rs. 51,64,125 (including share premium of Rs. 63.25 per equity share). 4. M/s. Savegenie E-marketing Private Limited, the present assessee, filed its return of income for the A.Y under consideration u/s 139(1) of the Income Tax Act, 1961 ('Act') on 11.09.2015, declaring NIL income. The case of the assessee was selected for Limited Scrutiny and the AO, during the assessment proceedings u/s 143(3) examined the allotment of shares at the premium and ultimately accepted the ROI vide his order u/s 143(3) dated 01.11.2017. 5. Subsequently the AO, issued a notice u/s 148 dated 30.03.2021, in response to which the assessee filed a return declaring a loss of Rs 39,79,952/- on 13.05.2021. The Assessing Officer reopened the assessment on the ground that for the year ending March 31, 2015, the assessee had issued 11,500 shares of face value with a premium of Rs. 63.25 to Shri Upkar Aggarwal though the Company did not have any intangible assets such as payments, copyri....
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.... whom share capital was allotted during the previous year. It is the say of the ld AR that the CIT(A) erred in upholding the addition made by the Assessing Officer u/s 68 of the Act as assessee has fulfilled all the conditions mentioned in section 68 and nature and source of share application money was explained and established during the assessment proceedings in case of resident individual Mr. Upkar Aggarwal who has paid share application money including share premium and to whom share capital was allotted during the previous year. 11. The ld. counsel for the assessee continued by saying that as per section 56(2)(viib) read with sub-rule (2) of Rule 11UA, the assessee has an option to determine the fair market value of shares to be issued either on NAV method (sub-rule (2)(a)) or the DCF Method (sub-rule (2)(b)), and the Assessing Officer cannot substitute his own value in place of value so determined. 12. The ld. counsel for the assessee submitted that the assessee has made allotment of equity shares as per DCF method on the basis of the valuation report by Chartered Accountant Firm. The valuation was done on the basis of the Discounted Cash Flow Methodology and was proper....
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....is of information and material available on the date of valuation and projection of future revenue. There is no dispute that methodology adopted by the Respondent-Assessee has been done applying a recognized and accepted method. Since the performance did not match the projections, Revenue sought to challenge the valuation, on that footing. This approach lacks material foundation and is irrational since the valuation is intrinsically based on projections which can be affected by various factors. We cannot lose sight of the fact that the valuer makes forecast or approximation, based on potential value of business. However, the underline facts and assumptions can undergo change over a period of time. The Courts have repeatedly held that valuation is not an exact science, and therefore cannot be done with arithmetic precision. It is a technical and complex problem which can be appropriately left to the consideration and wisdom of experts in the field 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 rej....
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...., the AO has abruptly added the amount of premium collected u/s 68 of the Act without assigning any reason for doing so. We are further at loss to understand the mind of CIT(A) when he inexplicably sustained the same. At one point, the CIT(A) states that section 56(2)(viib) was rightly invoked to tax the excessive share premium whereas the facts shows that no addition was made under section 56(2)(viib) and on the other hand upheld the addition u/s 68 without any discussion. 19. With regard to additions u/s 68, the assessee had taken a plea that it is protected by the second proviso in section 68 of the Act which provides for furnishing of source of source in case of share application in a private company fron resident subscribers only and not from the non-resident subscribers. We however are not convinced with the assessee's argument. To elaborate, the provision of section 68 is reproduced below: Cash credits. 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer,....
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....omestic person. Insofar as the share application money, share capital, share premium in private companies comes from the non-resident, the Statute does not proscribe the assessee to explain the source of source where the subscriber is a non-resident. The 2nd proviso to section 68 only requires that the subscriber who is a resident, is mandatorily required to provide explanation regarding its source of funds for subscribing into the shares of the private limited company. If the assessee's argument that non-residents subscribers are excluded from justifying their share subscription amount, is accepted, it would tantamount to bypassing the substantive provisions of section 68 and creating a legal hole where any person may form a private company under the law and allot shares to non-resident person, whose source of share application money can not be legally examined for its veracity. There cannot be any such situation envisaged that it is a legislative intent to allow any person to route their unaccounted income through non-resident subscribers. In view of the discussion above, the assessee's contention that the shares subscriber being a non-resident, is exempted from the rigours of th....