TaxTMI 
TaxTMI 
2026 (7) TMI 194
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..... First we take assessee's appeal in ITA No.7675/Del/2025 for Assessment Year 2017-18. ITA No.7675/Del/2025 [Assessment Year 2017-18] 4. Brief facts of the case are that the assessee is a Private Limited company, engaged in the business of mineral exploration activities principally for gold in southern India. The return of income for the year under appeal was declared on 13.11.2017, declaring total income of INR 3,03,350/-. The case was selected for limited scrutiny where one of the reasons is large share premium received during the year. It was observed that during the year under appeal, the assessee has issued 92090 equity shares having Fair Market Value ("FMV") of INR 1.00 each at a total consideration of INR 12,12,54,726/- in 02 trenches. In first trench, 6922 equity shares of FMV of INR 1.00 each were issued at a premium of INR 1443.50 per share to M/s. Thriveni Earth Movers P. Ltd. on 07.06.2016. Further, 2285 equity shares of FMV @ INR 1.00 were issued on the same date at a premium of INR 1443.50 to M/s. Australian Indian Resources. Besides this, on 24.06.2016 further 2072 equity shares at a premium of INR 1443.50 were issued to Australian Indian Resources. In second t....
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....R vehemently argued that the assessee has valued its share in terms of the method provided as per section 56(2)(viib) r.w. Rule 11UA(ii) of Income Tax Rules,1962 (the Rules) which provides the method of determination of FMV of unquoted equity shares with the formula prescribed in clause (a) or on the basis of Report drawn by a merchant banker who determined the FMV as per DCF method. In clause (a) of section 11UA(ii), the assessee has an option to follow either NAV method or DCF method. He further submits that the shares were valued as per DCF method where the projection were made by considering the future prospects of the business and after considering various other factors effecting the future growth of the business. sLd.AR submits that the projections were based on factors like growth of the company, economic and market conditions, business conditions, feasibility report regarding availability of mineral etc. and they cannot be evaluated purely on the arithmetical proposition under DCF method. As per ld. AR valuation under DCF method has always been done at approximation and on assumption of various factors. He, therefore, submits that the allegations of the AO with respect to t....
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....aterial available on record. The solitary issue in appeal before us is with respect to FMV of the shares issued during the year under appeal. As per the assessee, Two Valuation reports were obtained from independent Chartered Accountants at the time of allotment of shares on every occasion where the valuation was done based on DCF method as prescribed under Rule 11UA(2) of Rules. Whereas the AO after raising substantial doubts about the projection made in DCF method and rejecting both the reports, has substituted the FMV calculated by him as per NAV method and made the addition. 11. It is observed that the assessee is engaged in the business of mining mainly of gold in Southern part of India. During the year, assessee has raised share capital at a premium and for these purposes, has obtained two independent valuation reports from two firms of Chartered Accountants placed at pages 151 to 162 of the Paper Book wherein study report and feasibility report, both for Jonnagiri Gold Mines projects placed at PB pages 178 to 244, were considered. Further the assessee has filed copy of the mining area allotted to it in terms of Mining lease Agreement executed on 21.10.2013 between the Gov....
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....in independent Valuation Report from the Authorized valuers who can determine the FMV based on the method adopted by the assessee. 14. In the instant case, the AO has been able to demonstrate that the methodology adopted by the assessee for determining the FMV of the shares is incorrect where the approximation of future projections was without any cogent basis and no cogent material was brought on record in support of the same. Though herein above, we have referred the material based on which the valuation was done by the valuer however, the feasibility reports filed by the assessee to the valuer contained various defects which were pointed out by the AO in para 9 & 10 of his order which remained unanswered by the assessee. In such scenario, we are of the opinion that both the Valuation Reports filed by the assessee suffers defects and therefore, cannot be accepted. At the same time, the valuation done by the AO based on NAV method cannot taken as the basis for determination of the FMV. Thus, in the larger interest of justice and to conclude, we direct the AO to obtain fresh reports from the approved valuer based on DCF method for determination of FMV of the shares of the assess....