"1. Whether on the facts and in the
circumstances of the case, the Tribunal is right
in law in deleting addition made under section
56(2)(viib) of the Act amounting to
Rs.33,71,77,500 towards share premium
collected from closely held company which is
contrary to the intention lying behind the
introduction of the said provision to bring to
tax the unaccounted income brought into
books of account through unwarranted or
unjustified share premium by Corporate
entities"?
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2. Whether on the facts and in the
circumstances of the case, the Tribunal's order
is perverse in nature in deleting the addition
made under section 56(2)(viib) amounting to
Rs.33,71,77,500 pertaining to share premium
collected when assessee had been incurring
huge loss and there was no justification
provided for fixing such high share value and
ignoring findings recorded in assessment order
that common director of the assess-company
and investor-company namely, M/s UKN
Properties Ltd had given a statement during
the course of Survey conducted in case of
investor company on 18/11/2015 that there
was no valuation report obtained for
determining the value of the share allotted on
which premium was collected"?
3. "Whether on the facts and in the
circumstances of the case, the Tribunal's order
is perverse in nature in setting aside
disallowance made in share premium by
erroneously holding that the valuation report
on DCF Method produced during assessment
proceedings was a valid report justifying
valuation of shares without appreciating that
there was no basis for projections made under
DCF method and also ignoring the reasons
assigned by assessing authority and CIT(A) on
the issue"?
2. Learned Panel Counsel appearing for the Assessee
vehemently submits that the Tribunal has wrongly
construed Sec.56(2)(viib) of the Income Tax Act, 1961
and thereby committed error of deleting addition made in
NC: 2025:KHC:9397-DB
an amount of Rs.33,71,77,500/- in respect of securities
premia credited on share issue in question.
3. Brief fact matrix of the case as succinctly stated by
the Assessing Authority is reflected in para 4 of
Assessment Order dated 13.03.2016 which reads as
under:
"4. It is seen from the Balance Sheet of the
assess that there is Rs.33,71,77,500 received
as securities premium credited on share issue.
AR was asked vide order sheet noting dated
19.01.2016 to furnish the details of share
issued along with share premium. AR of the
assessee vide submission dated 25.02.2016
furnished the details of shares issued along
with share premium details. During the A.Y.
2013-14 company has allotted 2,04,35,000
equity shares of Rs.10 each at premium of
Rs.165 per share. Company has allotted
shares as under.
Parties to No. of Face Value of
whom share shares Value Premium/share
allotted of
Share
M/s UKN 13,00,000 Rs.10 Rs.165
Properties Pvt
Ltd
M/s Kshema 6,33,000 Rs.10 Rs.165
Geo Holdings
Pvt Ltd
Mr. Gautam 65,000 Rs.10 Rs.165
Nambisan
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M/s Glow 45,500 Rs.10 Rs.165
Crane Project
4. Having heard learned panel Counsel appearing for the
revenue and the learned Senior Advocate representing the
Assessee we decline indulgence in the matter inasmuch as
the Tribunal has construed the subject provision of the Act
keeping in view the fair market value of the shares in
question and not the premium amount. Learned Senior
Advocate Mr. Shankar is right in telling us that the fair
market value of the Shares in question has been arrived at
by the Assessee by adopting one of the statutorily
designated methods in terms of Rule 11UA(2) of the
extant Rules.
5. It is relevant to reproduce Tribunal's observation at
paras 18 & 19:
"18. In the present case, we notice that the
assessee had submitted the valuation report
issued by a Chartered Accountant using DCF
method of valuation. The assessee has
projected its income, which according to the ld.
AR, is substantiated by the JDA entered into by
the assessee. We notice that the lower
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authorities have rejected the DCF method of
valuation on the ground that the same is not
based on any scientific method and that since
the assessee is making a loss, there is no
possibility of valuing the shares of the assessee
at a premium. Further, the lower authorities
have not gone into the details used by the
assessee under DCF method to arrive at the
valuation and rejected the entire methodology
as adopted by the assessee. It is also noticed
that one of the reasons as quoted by the AO for
not considering the valuation report is that the
Director during the survey proceedings has
stated that there is no valuation report. We
are unable appreciate this reason for rejection
as the satisfaction to be recorded by the AO
should not be objective satisfaction exercised
at his discretion, but a subjective satisfaction
based on the facts of the case. The lower
authorities have not examined the basis on
which the valuation is done and from the
perusal of facts, no details in this regard have
been called for by the lower authorities. The
valuation report is rejected based on the
objective satisfaction and not based on detailed
examination.
19.In view of the above discussion and
respectfully following the decision of the
Tribunal in the case of Town Essential Private
Limited Ltd(supra), we hold that the valuation
done by the assessee cannot be rejected
without recording any finding to the contrary by
the lower authorities and therefore we delete
the addition made in this regard."
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In the above circumstances, the Substantial
Questions of Law raised in the appeal are answered
against the Revenue and eventually in favour of Assessee.
Accordingly, appeal is dismissed, costs having been made
easy.
Sd/-
(KRISHNA S DIXIT)
JUDGE
Sd/-
(RAMACHANDRA D. HUDDAR)
JUDGE
Snb/
