TaxTMI 
TaxTMI 
2025 (11) TMI 1667
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....ithout appreciating the fact that Wipro Enterprises Limited is neither a venture capital undertaking nor a SEBI registered fund and accordingly the 1st proviso of section 56(2)(viib) of the Act are not applicable. 2) The appellant craves leave to add, amend, modify or alter any of the grounds of appeal." 3. Brief facts relevant for the year under consideration are that the assessee which is a Private Limited Company engaged in the business of Beauty Wellness and Hospitality services under multiple brands at various locations in India and Abroad. Return of income for A.Y. 2020-21 declaring loss of Rs. 33,65,16,728/- furnished on 15.03.2022. Case selected for scrutiny followed by validly serving statutory notices and submissions were filed by the assessee. Ld. Assessing Officer (AO) observed that various foreign and domestic investments were made during the year under consideration amounting to Rs. 169.73 crore. In the details filed by the assessee, ld. AO observed that shares have been issued as per two valuation reports and as per the First Valuation Certificate the Fair Market Value is Rs. 50,176/- and in the Second Valuation Certificate the Fair Market Value per share....
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....he first proviso and such company fails to comply with any of those conditions, then, any consideration received for issue of share that exceeds the fair market value of such share shall be deemed to be the income of that company chargeable to income-tax for the previous year in which such failure has taken place and, it shall also be deemed that the company has under reported the said income in consequence of the misreporting referred to in sub-section (8) and sub-section (9) of section 270A for the said previous year.] [Provided also that the provisions of this clause shall not apply on or after the 1st day of April, 2025.] Explanation. For the purposes of this clause,- (a) the fair market value of the shares shall be the value- (i) as may be determined in accordance with such method as may be prescribed; or (ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, whiche....
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.... the assessment proceedings, the Ld. AO noticed that the appellant has issued shares at a premium to various resident and non-resident applicants at a price of Rs. 50,176/- per share and at a price of Rs. 1,61,077/-. Since the shares are not issued at face value, the Ld. AO held that provisions of Sec. 56(2)(vii)(b) get instantly attracted to this transaction. In the assessment order, the Ld.AO has rejected the valuation report made by Category I Merchant Banker viz. V.B. Desai Financial Services Ltd. dated 31.12.2020 and restricted the share premium to Rs. 50,176/- as against Rs. 1,61,077/- as per valuation report dated 30.04.2020. The appellant has submitted two valuation reports during the assessment proceedings. Both the valuation reports were prepared by V.B. Desai Financial Services Ltd, a Category I Merchant Banker. 6.2 The Ld. AO rejected the said valuation report on the following grounds. As per the Balance Sheet submitted by the assessee company, significant amount of debt is taken by the assessee company. However, while computing the weighted average cost of capital in the valuation. report, it is not evident whether cost of debt is considered and if it....
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.... certificate of registration as a Category I or a Category II Alternative Investment Fund and regulated under SEBI (Alternative Investment Fund) Regulations 2012. As submitted by the appellant, Ascent is registered as Securities and Exchange Board of India ('SEBI') Category II Alternative Investment Fund ('AIF') effective from 7 August 2017 (Copy of the registration certificate is also submitted by the appellant). Thus, the appellant has argued that given the express exemption to a 'Specified Fund' from the applicability of provisions of section 56(2)(viib) of the Act, no addition ought to be made in respect of the amount received from Ascent. Further, as per the Explanation to section 56(2)(viib), the terms "venture capital company", "venture capital fund" and "venture capital undertaking" shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of Explanation to clause (23FB) of section 10. As per Clause (c) of Explanation to clause (23FB) of section 10 of the Act. 'venture capital undertaking' shall be a venture capital undertaking as defined in clause (n) of regulation 2 of the Venture Capital Funds ('VCF....
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....en as the fair market value of the equity shares to the extent the consideration from such fair market value does not exceed the aggregate Consideration that is received from a venture capital fund or a venture capital company or a specified fund: Provided that the consideration has been received by the undertaking from a venture capital fund or a venture capital company or a specified fund, within a period of ninety days before or after the date of issue of shares which are the subject matter of valuation. Explanation - For the purposes of this clause,- (i) "specified fund" shall have the same meaning as assigned to it in clause (aa) of Explanation to clause (viib) of sub-section (2) of section 56; (ii) "venture capital company", "venture capital fund" and "venture capital undertaking shall have the same meaning assigned to them in clause (b) of Explanation to clause (viib) of sub-section (2) of section 56. Illustration: If a venture capital undertaking receives a consideration of fifty thousand rupees from a venture capital company for issue of one hundred shares at the rate of five hundred rupees per share, then such an undertaking ca....
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....ons of section 56(2)(viib) of the Act. However, before us, ld. Counsel for the assessee has fairly admitted that WEL is not a SEBI registered alternate investment fund and that ld.CIT(A) while dealing with the issue of investments received from Ascent Private Equity Trust and WEL, has taken the basis of Ascent Private Equity Trust which is a SEBI registered alternate investment fund and therefore while giving relief to the assessee ld.CIT(A) failed to take note that WEL is not a SEBI registered alternate investment fund. Therefore, the very basis of giving relief to the assessee by ld.CIT(A) is incorrect. However, since the assessee has furnished various other details of WEL in support of its contention that source of the investment is duly explained along with relevant documentary evidences and the shares have been issued at Fair Market Value arrived at by the Registered Valuer applying Discounted Cash Flow method, we deem it appropriate that the issue deserves to be restored back to the file of ld.CIT(A) for afresh adjudication in light of the details filed before this Tribunal. 10. Accordingly, the issue of investment from WEL at Rs. 10,33,59,732/- received by the assessee to....