TaxTMI 
TaxTMI 
2026 (5) TMI 406
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....Income Tax Act, 1961 (the Act, in short) dated 06.05.2021 for Assessment Year 2018-19. 2. Brief facts of the case are that assessee is a company engaged in the business of providing tutoring to students through home tutoring and online tutoring. The return of income for the year under appeal was filed at a loss of Rs. 5,49,463/-. The case was selected for limited scrutiny for reason - 'Share Premium'. The AO observed that during the year under appeal assessee has converted "Zero Coupon Unsecured Compulsorily Convertible Debentures" (herein after referred as CCD's) into the equity of 2,24,250 share face value of Rs. 10/- each at a premium of Rs. 1472/- per share to M/s Mayuka Investment Ltd. The assessee has filed valuation report obtaine....
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....g any defect vis-a-vis Rule 11UA formula or underlying data. 3. The appellant contends that rule 11U clearly referred to the balance sheet drawn up on a date immediately preceding the valuation date which had been approved and adopted in the AGM, which admittedly was the Balance Sheet for the period ending 31.03.2016 whereas AO misinterpreted the term "balance sheet" adverted to in Rule 11U to mean the audited accounts as on 31.03.2017 although these were approved in the AGM held on 30.09.2017 i.e. after the date of allotment of shares. 4. The Ld. CIT(A) and the AO both erred in applying Section 56(2)(viib) on the ground that it is triggered by the mere allotment of equity shares. However, Section 56(2)(viib) triggers only....
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....d 31.03.2017. Claim of the assessee is that during the year under appeal these CCDs were converted into 2,24,250 equity shares of face value of Rs. 10/- each at the premium Rs. 1472/- per share. In support to the value per share and the premium charged, assessee filed valuation report of approved valuer wherein the valuation was done as per Rule 11UA of the Income Tax Rules, 1962 (the Rules) as per NAV method where the figures were taken from the last drawn audited Balance Sheet as at 31.03.2016. The case of the AO is that assessee should have taken the figures as per the Balance Sheet as at 31.03.2017 for determination of FMV under NAV method. It was the claim of the assessee that as per Rule 11UA, the last drawn audited Balance Sheet i.e.....
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....t with issue of valuation on the basis of NAV or DCF method, however, the basic principle was laid down in para 18 above that when no consideration was received for allotment of shares, provisions of section 56(2)(viib) of the Act are not applicable. Before going further, provisions of section 56(2)(viib) of the Act are reproduced as under: Sec. 56(2)(viib) "where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares: Provided that this clause ....
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....n the share capital issued at premium. Therefore, by respectfully following the judgments of the aforesaid case of Hon'ble Himachal Pradesh High Court in the case of M/s I.A. Hydor Energy (P) Ltd. (supra), since no funds were received during the year under appeal, no addition could be made u/s 56(2)(viib) of the Act. We order accordingly. 8. Now coming to the second aspect whether the Balance Sheet as at 31.03.2016 is to be taken for the purposes of valuation or audited Balance Sheet as at 31.03.2017 is to be considered. It is observed that the shares were allotted on 08.06.2017, and in terms of Rule-11U(b) of the Rules, the term balance sheet is defined as under: "(b) "balance sheet", in relation to any company, means,- ....
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....Bench of ITAT, Chandigarh in the case of Electra Paper and Board Pvt. Ltd. vs. ITO in ITA No.222/Chd/2021 has held that unaudited balance sheet as drawn on the valuation date should be sufficient, if on subsequent date there was no difference if compared to Audited Balance sheet of the same year. As observed from the facts of the present case, the assessee converted the CCDs into Equity shares on 08.06.20217 however, the audited balance sheet as at 31.03.2017 was drawn on 28.09.2017 when the same was signed by the management of assessee company and put before the Board for approval. Since, the copy of the unaudited Balance Sheet and audited Balance sheet as at 31.03.2017 are available before us, thus we are unable to state whether the un....