TaxTMI 
TaxTMI 
2026 (6) TMI 601
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....in not considering the judgement of Hon'ble ITAT which was confirmed by the Hon'ble High Court of Delhi in deciding that computation method for the relevant A.Y. be based on Book value and not on Market Value of asset. 2. The appellant craves leave to add, amend and alter the grounds of appeal during appellate proceedings. 3. Whether CIT(A) has erred in permitting assessee to determine the Fair market value of unquoted shares computed as per assessee's choice of method (i.e.DCF) which is on the higher side and not applying the NAV method book value based method as per section 56(2)(viib) read with Rule 11UA(2)(a) applicable in the case. 4. Whether CIT(A) has erred in not deciding the case on merits 5 a....
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....hares at premium is in accord with the deeming provision. 5. Ld. Counsel further submitted that the Tribunal held that the method adopted for reworking of the subsidiary company by applying DCF method or any known method is permissible as long as the assessee is able to establish the correctness of the valuation in the light of the valuation report furnished. The decision squarely applies to the facts for the assessment year under consideration also. 6. Ld. Counsel for the assessee further submits that for the year under consideration the Ld. CIT(A) following the decision of the Tribunal for the A.Y.2016-17 deleted the addition made u/s. 56(2)(viib) of the Act and since the facts are identical the decision be applied for the year unde....
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....2017-18. As per the assessment order, the case was selected under CASS for 'Complete Scrutiny'. Accordingly, the AO issued notice u/s. 143(2) dated 23.08.2018, which was duly served upon the appellant. Thereafter, the AO issued notice u/s. 142(1) along with questionnaire on 23.07.2019 and 05.09.2019. In response, the AR of the appellant filed requisite information/details called for by the AO through e-proceedings portal. 6.2 On perusal of the submissions filed by the appellant, it is noted that the appellant's appeal No. CIT(A), Delhi- 5/10280/2018-19 for A.Y. 2016-17was allowed by Hon'ble ITAT Delhi 'E' Bench vide ITA No. 3685/Del/2023 dated 05.09.2024. The relevant portion of the said order is quoted below: "6. We have ....
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....ehind the introduction of deeming provisions of Section 56(2)(viib) in the statute is to deter generation and use of black money. 9.1 In the instant case, the assessee has issued shares to one M/s. Legacy Food Pvt. Ltd. for a consideration of Rs. 80 per share including Rs. 70 per share towards premium on face value of Rs. 10 per equity share. The assessee seeks to justify the premium of Rs. 70 per share as fair market value on the touchstone of Section 56(2)(viib) r.w. Rule 11UA of I.T. Rules, 1962. 9.2 For this purpose, the assessee submits that it owns overseas subsidiary by holding 100% shares thereon and thus have complete control over such entity. The investment value in such subsidiary company shown in its books at b....
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....ness of the valuation of the property in subsidiary company for the purpose of re-working the book value is based on the representations from management. The CIT(A) has also upheld the action of the AO citing constraints laid down by Rule 11UA whereby no option has been provided to modify the figures appearing in the balance sheet for the purposes of determination of NAV. 9.5 The assessee, on the other hand, contends that apart from the recognized methods of valuation contemplated in Rule 11UA, the assessee is also entitled to determine the FMV of the shares subject to the satisfaction of the AO on the date of issue of shares. In terms of Explanation appended to Section 56(2)(viib), once it is demonstrated to the satisfaction of th....
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....ient. Both AO and the CIT(A) thus have proceeded on misconception that while determining the FMV as per NAV, the book value cannot at all be substituted even on some rational basis. As noted, in view of Explanation to Section 56(2)(viib), the assessee is entitled to suitably modify the NAV as long as the NAV is capable of being substituted by some proof or competent evidence. On facts, the assessee has produced the valuation report as well as the market valuation of Hotel Residence AG Switzerland in German currency. The valuation of shares of subsidiary company to determine the FMV of the holding company, i.e., the assessee company for the purposes of issuance of shares at premium thus is in accord with the deeming provision. The CIT(A), as....