TaxTMI 
TaxTMI 
2024 (8) TMI 1713
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.... assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) r.w.s 144C(3) of the Act on 28-02-2019. The grounds of appeal read as under: - 1. The order of the learned CIT (Appeals) is contrary to law and the facts of the case and is devoid of reasoning. 2. The learned Assessing Officer ought to have appreciated that capital gains have to be computed based on the statutory provisions and that Section 48 requires that capital gains be computed by adopting the "full value of consideration received or accruing as a result of the transfer of the capital asset" and does not permit the actual consideration to be substituted by the fair market value. 3. The learned Assessing Officer erred in adopting the fair value of th....
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....ise for our consideration is addition made by Ld. AO under the head capital gains. 2. The Ld. AR advanced arguments taking support of various documents as placed on record along with various judicial decisions and assailed the impugned additions. The Ld. CIT-DR controverted the same and supported the additions made by Ld. AO. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Assessment Proceedings 3.1 The assessee being non-resident corporate assessee incorporated in USA is stated to be holding company of another entity by the name M/s Sulekha.com New Media Private Ltd. (Sulekha.com in short). The shareholders of the assessee were promoters of Sulekha.com. The assessee held approx.....
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....fer shall be deemed to be the full value of consideration received or accruing as a result of such transfer. The assessee assailed the same on the ground that the provisions of Sec.50D could be applied only when the sale value could not be determined and the machinery of computation of capital gains fails. 3.4 However, Ld. AO alleged that the shares were not valued by any method as prescribed under the Income Tax Act which would mean that the correct value of the shares could not be determined and the provisions of Sec.50D gets attracted in the case of the assessee. Rule 11UA provide for valuation of shares under two methods namely Net Asst Method (NAV) and DCF Method. The values arrived by DCF method was Rs.2135 per shares whereas value....
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....e Supreme Court in the case of CIT vs. Gillander Arbuthnot & Co. (87 ITR 407) holding that full value of the consideration is the consideration agreed to be paid and not the market value. The assessee also cited various other subsequent decisions taking the same view. The assessee also submitted that in case of unlisted companies, the only statutory basis for valuation was provided under Rule 11UA which has been prescribed u/s 50CA which permit substitution of FMV for sale consideration only from AY 2018-19 and not before that. It was also submitted that Sec.50D would have no application where the sale consideration was known. The assessee also submitted that it obtained a valuation report which yielded value of Rs.31.41 per share which was....
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....pugned sales transactions. The Ld. AO has not referred the valuation to an independent valuer but proceeded to compute the fair market value of per share based on projections made in earlier / subsequent years and arrived at value of Rs.1162/- per share disregarding the agreement value between the assessee and Norwest. However, the aforesaid valuation, in our opinion, is clearly fallacious one since the valuation of shares would keep on fluctuating depending upon the performance of the underlying entity and the valuation could not be arrived merely on the basis of projections. There is no finding that the shares were sold at an under-valued price. 6. Pertinently, in terms of Sec.48 of the Act, the capital gains have to be computed ....
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....er book. All these decisions support the view that full value of consideration could not be substituted with fair market value. Though Ld. CIT(A) has stated that the provisions of Sec. 50CA has not been invoked by Ld. AO, we find that the aforesaid provisions have been introduced by Finance Act, 2017 w.e.f. AY 2018-19 only and the same do not apply to this year. This being so, the impugned addition as made by Ld. AO, in our considered opinion, is not sustainable in law........ 6. We find that the facts as well as issues are quite identical in this year. The only difference is that Ld. AO has invoked the provisions of Sec.50D in this year. However, upon bare perusal of Sec.50D, it could be seen that this section provides that where the co....