TaxTMI 
TaxTMI 
2025 (11) TMI 1301
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....e has received share premium of INR 8,64,22,208/- on the issue of 17093 equity shares at a premium of INR 5,056/- per share to M/s. Gyan Enterprises Pvt. Ltd. For valuation of the shares, the assessee has followed the "Valuation under Net Asset Value Method Adjusted by value of asset on valuation date" and submitted the report of valuer. The AO based on the report earlier submitted by the assessee of the valuer according to which the shares was valued at INR 274/-, held the excess amount of INR 8,19,09,656/- as income of the assessee u/s 56(2)(viib) of the Act. 3. Against the said order, the assessee preferred appeal before Ld. CIT(A) who has confirmed the order of AO therefore, the assessee is in appeal before the Tribunal by taking following grounds of appeal:- 1. "That the addition of Rs.8, 19,09,656/- u/s 56(2)(viib) of the Incometax Act, 1961 (the Act) on account of issuance of shares at a premium to the holding company M/s Gyan Enterprises Pvt. Ltd. is arbitrary, unjust and at any rate very excessive. 2) That the addition of Rs. 8,19,09,656/- u/s 56(2)(viib) of the Act by invoking the provision of Rule 11-UA of the Income Tax Rules, 1962 instead of working out the....
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....00 crores taken by the assessee for the purpose of valuation of the shares. As per Ld.AR, if valuation done by DVO is substituted as against the value taken by the assessee, the value per share would be increased. This further established that the shares were issued by the assessee on fair market value and accordingly, addition sustained at INR 8,19,09,656/- deserves to be deleted. Ld.AR for the assessee filed synopsis in support of his claim. The relevant contents of the synopsis are reproduced as under:- A B Propmart Private Limited Punjabi Bhawan, 4TH Floor, 10 Rouse Avenue, New Delhi - 110002 PAN: AAGCA7340G Synopsis of the Appeal The issue relates to share premium received by the Taxpayer u/s 56(2)(viib) by its Holding Company for the FY 2013-14. The taxpayer viz AB Propmart Ltd [The taxpayer is in the business of promoting, buying, selling, lease or acquire property in India] is a subsidiary company of M/s Gyan Enterprises Pvt Ltd, holding 91% of equity shares as on 31 March 2014. In FY 2012-13, the assessee, had purchased agriculture land admeasuring to 8.86 acres at Village Sarangpur New Delhi at Rs 7.158 crs from Ragubir Singh and Others. A su....
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....r of the Taxpayer 1. The Appellant submits, that two main grievances of both Ld CIT(A) and Ld AO is that purchase deed has not be submitted and no proof has given to support the proof of Rs 13 crs valuation report. Further, the CIT(A) has also stated that increase in value of property has no bearing on the NAV as per Rule 11UA. Before, we dwell on these factual grievances it's worth noting that in terms of Parent- subsidiary, section 56(2((viib) cannot be invoked and for this purpose it wishes to rely upon the following Judgements of this Court and Hon'ble Delhi High Court. SI.no CITATION Ruling 1 1 FIS PAYMENT SOLUTIONS AND SERVICES INDIA PRIVATE LIMITED VERSUS UOI & ORS W. P. (C) 10289/2024 & CM APPL. 42097/2024 dated July 29, 2024. Delhi High Court Delhi High court relying on BLP Vayu and Kissandhan Agri, remanded the matter back to DRP on issue of 56(2)(viib). 2 BLP Vayu (Project-1) (P.) Ltd. vs. PCIT 2023 SCC OnLine ITAT 397- Delhi ITAT 2023. Which had followed DCIT v. Ozone India Ltd. in ITA No. 2081/Ahd/2018 order dated 13.04.2021 The object of deeming an unjustified premium charged on issue of share as taxable income u/s 56(2)(vii....
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....er hand, Ld. Sr. DR for the Revenue supports the order of the lower authorities and submits that the assessee has not followed the method of valuation prescribed under Rule 11UA and therefore, the lower authorities has rightly made the additions which orders deserves to be uphold. 7. Heard the contentions of both the parties and perused the material available on record. In the instant case, the shares were issued by the assessee company to its holding company M/s. Gyan Enterprises Pvt. Ltd. for a premium of INR 5,056/- per share. The AO alleged that this valuation was done based on the fair market value of land as on the date of valuation though the said land was purchased and disclosed in the balance sheet at INR 7,89,17,962/- and the same was valued at INR 13.00 crores as on the date of valuation for the purpose of determination of the fair market value of the shares. The AO accordingly, applied the valuation of INR 274/- per share for making the addition u/s 56(2)(viib) of the Act which report was also filed by the assessee for which it was claimed that in the said report incorrect figure were taken inadvertently. It is not in dispute that shares were allotted to the holding ....
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.... the purported credibility of premium charged does not really matter as no prejudice can possibly result from the outcome of such inquiry. Thus, the condition for applicability of Section 263 for inquiry into the transactions between to interwoven holding and subsidiary company is of no consequence. We also affirmatively note the decision of SMC Bench in the case of KBC India Pvt. Ltd. vs. ITO in ITA No. 9710/Del/2019 order dated 02.11.2022 (SMC) where it was observed that Section 56(2)(viib) could not be applied in the case of transaction between holding company and wholly owned subsidiary in the absence of any benefit occurring to any outsider." 9. It is further seen that DVO has valued the said property at INR 20.75 crores as against the valuation done by the assessee at INR 13 crores. Moreover, the AO had relied upon the circle rate of the land based on the notification issued by Revenue Department of Government of NCT of Delhi, according to which the valuation of the said property would be around INR 4.69 crores. Thus, there are four figures available towards the fair market value of the land owned by the assessee company, they are as under :- (i) The value at whic....
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....herefore 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 rejected the valuation of the Respondent-Assessee and failed to provide any alternate fair value of shares. Furthermore, as noted in the impugned order and as also pointed out by Mr. Vohra, the shares in the present scenario have not been subscribed to by any sister concern or closely related person, but by outside investors. Indeed, if they have seen certain potential and accepted this valuation, then Appellant-Revenue cannot question their wisdom. The valuation is a question of fact which would depend upon appreciation of material or evidence. The methodology adopted by the Respondent-Assessee, accepted by the learned ITAT, is a conclusion of fact drawn on the basis of material and facts available. The test laid down by the Courts for interfering with the findings of a value....
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....P is amall in size as compared to the subject property. Hence adjustment on this a/c: add 10% of (A) -1157 (D) The land rate of the Subject Property as on 14.03.1997 (i.e. (A)+(B)+(C)+(D) 5785 Fair Market Value of land of the subject property as on 14.03.1997 (Land area in sqm X X Rate of per sqm) Land Area in Sqm Rate Per Sqm 35,861.837 5,785.00 207,460,726.47 Say Rs.207,460,700 " Fair Market Value of land of the subject property as on 14.03.1997 (Land area in sqm X 4. The Appellant submits, that the report of the DVO made u/s 142A is binding on assessing authority and the CIT(A) wrongly ignored the actual evidence as per DVO report. For these purposes, the Appellant wishes to place reliance on following orders. In support of this claim, the appellant placed reliance on the judgment of the hon'bleKolkatta IT AT, in the case of [2012] 19 taxmann.com 121 (Kol.) in the IT AT Kolkata Bench 'C' where in the hon'ble IT AT held as under: Section 50C, read with section 48, of the Income Tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases- Assessment Year 2005-06 - Assessee sold a property and disclosed sal....
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.... Officer -Held, Yes [Para 7] [In Favour of Assessee] Further reliance is placed on the judgment of hon'ble of IT AT Vishakhapatnam in the case of [2014] 45 taxmann.com 141 (Vishakhapatnam- Trib.) where in the hon'ble IT AT held as under: Section 50C of the Income-Tax Act, 1961 -Capital gains - Special provision for full value of consideration in certain cases (Valuation made by DVO) - Assessment year 2006-07 - Wliether where fair market value determined by DVO on a reference made by Assessing Officer in terms of sub-section (2) of Section 50C is less than value adopted or assessed by Stamp Valuation Authority then such fair market value determined by DVO has to be treated as full value of consideration received by assessee for purpose of computing capital gain - Held, yes [Para 10] [In Favour of Revenue] Reliance is also placed on the judgment Hon'ble of IT AT - Pune Bench "SMC" in the case of Shri Anil MurlidharDeshmukh v/s. The Income Tax Officer Ward 3 (2), Nashik [ITA No.1821/Pun/2017 - A.Y .- 2013-14] where in the hon'ble IT AT held as under: It is crystal clear that generally, when the A.O has obtained the DVO report then the same is binding. It is thus clear that....