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2022 (7) TMI 895 - AT - Income TaxAddition on account of share premium received in excess of fair market value u/s 56(2)(vii)(b) - addition by applying the provisions of Section 56(2)(viib) by rejecting the DCF method followed by the assessee and applied the fair market value for the share application money and made the addition - HELD THAT - AO has not brought any adverse evidence or report of another expert on record and merely brushed aside the DCF method followed by the assessee. He has further given a finding that in this case the provisions of section 56(2)(viib) are not applicable as the share application money was received in the FY 2010-11. CIT(A) further noted that since there was no provision of section 56(2)(viib) in statute at the time of receiving the share application money in FY 2010-11, the said provision cannot be applied in any manner and no addition can be made invoking the said provision. To arrive to such conclusion, CIT(A) has taken support of various orders of Hon ble Supreme Court, High Courts and Tribunal which have been reproduced in the preceding paragraph. CIT(A), therefore, held that the provisions of Section 56(2)(viib) of the Act could not be attracted on the share application money received in the FY 2010-11 i.e. prior to the insertion of the said provision and deleted the impugned addition made by the A.O. Before us, no fallacy in the findings of CIT(A) has been pointed-out by the Revenue. In such a situation, we find no reason to interfere with the order of the CIT(A). We, therefore, confirm the order of the Ld. CIT(A) on this issue and dismiss Ground of appeal No.1 of the appeal of the Revenue.
Issues Involved:
1. Applicability of Section 56(2)(viib) of the I.T. Act, 1961 to the share premium received by the assessee. Issue-wise Detailed Analysis: 1. Applicability of Section 56(2)(viib) of the I.T. Act, 1961: The primary issue in this case is whether the addition of Rs.10,74,52,800/- on account of share premium received in excess of fair market value can be made under Section 56(2)(viib) of the I.T. Act, 1961. Facts of the Case: The assessee, a company engaged in broadcasting and telecasting TV channels, filed its return of income for A.Y. 2016-17 declaring NIL income. The case was selected for scrutiny, and the A.O. determined the total income at Rs.11,74,52,800/-. The A.O. noted that the assessee had issued 4720 equity shares at Rs.22,775/- each, introducing fresh capital and share premium. The A.O. applied Section 56(2)(viib), rejecting the DCF method valuation and instead using the Net Asset method to determine the fair market value of the shares at Rs.10/- each, thus making an addition of Rs.10,74,52,800/-. CIT(A) Findings: The Ld. CIT(A) deleted the addition, observing that the share application money was received in FY 2010-11, and the shares were allotted in FY 2015-16 as per a pre-existing agreement. The CIT(A) noted that Section 56(2)(viib) was introduced in AY 2013-14 and cannot be applied retrospectively to share application money received in FY 2010-11. The CIT(A) also emphasized that the DCF method is a recognized valuation method and cannot be disregarded without adequate evidence or an alternative expert report. Tribunal's Analysis: The Tribunal upheld the CIT(A)'s decision, agreeing that the provisions of Section 56(2)(viib) are not applicable since the share application money was received before the introduction of the said provision. The Tribunal noted that the A.O. did not provide any adverse evidence against the DCF method used by the assessee. The Tribunal also affirmed that the DCF method, based on projections, is a recognized method and cannot be faulted merely because actual figures differ from projections. Conclusion: The Tribunal confirmed the CIT(A)'s order, concluding that Section 56(2)(viib) could not be applied to the share application money received in FY 2010-11, and thus, the addition made by the A.O. was rightly deleted. The appeal of the Revenue was dismissed. Order: The appeal of the Revenue is dismissed. The order was pronounced in the open Court on 19.07.2022.
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