AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 1772
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.... ● 60% by Sun TV Ltd. (listed Co.) ● 20% by South Asia Multimedia Technologies Ltd. of Mauritius (Foreign/Non-resident Co.) 3.1 The case of assessee is that SAFL is a valuable Co. having 39 FM broadcasting licenses and FM radio business across various cities in India and SAFL in turn held 49% indirect stake in 3 Digital Radio Broadcasting Cos. owning FM radio license and business in respective metro cities of Delhi, Mumbai and Kolkata. All the 42 FM stations were operated under a common and popular brand name "Red FM". 3.2 SAFL made a rights issue, for expanding its business, and same was to be subscribed by its existing shareholders (which included Appellant Co.) and for such purposes, SAFL got its shares valued by prescribed Chartered Accountant Valuer ("technical expert") KV Sriram who vide their valuation report dated 17/08/2015 valued SAFL's net equity value at Rs. 51,905.83 Lacs as per DCF method. The Valuer's report is placed at pages 107-131 of PB. Appellant claims that on the basis of this valuation, SAFL offered its rights issue at a price of Rs. 20/- per share (which included share premium of Rs.10/- per share). In order to subscribe to ....
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....ying Rule 11UA(1)(b) and therefore, AO accepted the face value of Rs.10/- each for fresh equity shares as issued and added the entire share premium of Rs. 2762 per share as received resulting in addition of Rs. 30,37,53,712 u/s 56(2)(viib) on fresh 109976 number of equity shares as issued during the year to AR and Max Flexi. The same was sustained by the CIT(A) for which the assessee is in appeal and has raised following grounds of appeal; "1. That the cryptic and non-reasoned order dated 27/07/2023 passed by the Ld. Commissioner of Income Tax (Appeals) - National Faceless Appeal Centre ("CIT(A)") under section 250 of the Income-tax Act, 1961 ("Act") is bad in law and against the principles of natural justice. 2. That the Ld. CIT(A) has erred on facts and in law in upholding/confirming the addition of Rs. 30,37,53,712 made under section 56(2)(vii)(b) of the Act on account of consideration received towards entire share premium amount for issuing unquoted equity shares of the Appellant during assessment year 2016-17. 3. That the Ld. CIT(A) has erred on facts and in law in not appreciating that Rule 11UA(1)(b) of Income-tax Rules as applied by the AO for det....
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.... 6. At outset we consider it relevant to mention that Ld. AR has filed a detailed synopsis and Ld. DR has primarily relied the findings of Ld. Tax authorities below and has also drawn our attention to a news article about ED investigations of Aircel-Maxix deal, which we consider has no bearing on the merits of case as discussed further. Now, on hearing both the sides we find that it is not disputed that share premium money received by the appellant from its shareholders from its fresh issue of shares made during the year under consideration have been fully utilized by the Appellant for subscribing to the rights issue of its investee Co. namely SAFL at a price of Rs.20/- per share, which was determined by SAFL based on its DCF valuation of Rs. 51,905.83 Lacs. Further, such rights issue of SAFL was fully subscribed by its existing shareholders establishing that not only assessee but other share holders of SAFL, Sun TV Network Limited, which is a listed Co. and regulated by SEBI and South Asia Multimedia Technologies Limited, which is a Mauritius based non-resident Co., had accepted the valuation of SAFL on DCF method. Moreover, such rights issue of shares as made during the year und....
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....y of Max Flexi in which AR was a significant shareholder. Post such fresh issue, the shareholding structure of Appellant was changed to being held 51% by AR and 49% by Max Flexi. Thus it is not a case where shares at unjustified premium have been issued to outside non-related parties so as to make addition section 56(2)(viib) of the Act. the valuation of shares as per DCF Method has backed by valuation report. Besides, the shares have allotted to the holding-company i.e., existing shareholders and not to an outsider and therefore, it does not make any difference to a shareholder in bringing money to its subsidiary company at premium or at cost when seen holistically. A reference can be made to the decision rendered by the Co-ordinate Bench of Tribunal in the case of BLP Vayu (Projects-I) Pvt. Ltd. vs. Pr. CIT (20213) 151 taxmann.com 47 wherein it has been observed that such deeming fiction seeking to charge unjustified premium as taxable is wholly inapplicable for transactions between holding and its subsidiary company where no income could be said to have accrued to ultimate beneficiary, i.e., holding company. 9. We also find that Rule 11UA(1)(b) as invoked by the AO in para 14....
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....the shares issued at Rs. 30 per share was less than the FMV and consequently the enhancement made the Ld. CIT(A) for making the addition of Rs. 48,16,66,660/- u/s 56 (2)(viib) is set aside and the addition by him is deleted". 12. In the light of aforesaid as we go through the order of Ld. CIT(A), we find that the order of AO is sustained by following findings in para 5.3 and 5.4 as follows:- "5.3 The Assessing Officer has pointed out certain anomalies in the Valuation Report: - i. The Valuation Report is highly subjective. Scientific parameters have not been used. ii. It is clearly mentioned in the Valuation Report that it is based upon the information furnished by the management. No independent data has been collected and analysed by the valuer before preparing the Valuation Report. iii. It has been further written that no independent investigation has been done and no data has been verified. iv. It has been further written that the valuer not responsible for arithmetical accuracy/logical consistency of any financial model or business plan provided by the company and used in valuation analysis. v. It has been noted by the As....