2022 (2) TMI 1333 - AT - Income Tax

Addition u/s 56(2)(viib) - Method adopted by the assessee for determining the FMV of shares - excess consideration received by the assessee for issue of shares, to the extent the consideration received exceeded the Fair Market Value of shares - HELD THAT - The facts of the case are that the assessee had issued 60,000/- shares of face value 10 at the premium of Rs. 90. To justify its valuation, the assessee had submitted valuation report by C.A. in which the land and building were valued at their market value as on the date of issue of shares. The market value of land and building was also duly substantiated by a valuation report. The revenue has rejected the valuation report of the shares stating that the assessee ought to have valued the fair market value of the shares only as per the method prescribed under Rule 11UA of the Act rules of Income Tax Rules, 1961. The method adopted by the assessee for determining the FMV of shares issued during the year is held to be in accordance with law. The decisions relied upon by the CIT(A) of the ITAT Delhi in the case of Agro Portfolio(p) Ltd. 2018 (5) TMI 1088 - ITAT DELHI is clearly not applicable in the present case since it related to the applicability of NAV method or DCF method for valuation of shares, which is not the issue in the present case. The decision of the ITAT Hyderabad in the case of Medplus Health Services P .Ltd 2016 (3) TMI 549 - ITAT HYDERABAD has we find been incorrectly interpreted by the CIT(A) to apply to the facts of the present case since the ITAT in the said case had rejected the adoption of market value of shares as fair market value and held that the same has to be determined as provided in law. The addition therefore made by the revenue authorities u/s. 56(2)(viib) of the Act is be held not sustainable in law and we direct deletion of the same. Employees' Provident Fund paid belatedly - disallowance of employees contribution to Provident Fund deposited belatedly, as per section 2(24)(x) of the Act r.w.s 36(1)(va) - HELD THAT - Assessee fairly admitted that this issue was covered against the assessee by the decision of Gujarat State Road Transport Corporation 2014 (1) TMI 502 - GUJARAT HIGH COURT . In view of the above, the disallowance of Employees Provident Fund paid belatedly is upheld.

Summary

Issues:
1. Valuation of shares under Section 56(2)(viib) of the Income Tax Act, 1961.
2. Disallowance of Employees' Provident Fund contribution.
3. Addition of interest on advances given.

Valuation of Shares:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the valuation of shares under Section 56(2)(viib) of the Income Tax Act for the Assessment Year 2016-17. The dispute arose when the Assessing Officer added an amount representing excess premium in the issue of shares, which was upheld by the Commissioner. The Assessing Officer determined the fair market value of shares based on the book value of assets and liabilities, while the assessee contended that the valuation submitted was in accordance with the law. The Tribunal held that the assessee had adopted the correct method for determining the fair market value of shares, as prescribed under the law, and directed the deletion of the addition made by the revenue authorities.

Disallowance of Employees' Provident Fund Contribution:
The issue involved the disallowance of employees' contribution to Provident Fund deposited belatedly, as per the relevant sections of the Income Tax Act. The Tribunal noted that the matter was covered against the assessee by a decision of the Jurisdictional High Court. Consequently, the disallowance of the Employees' Provident Fund contribution paid belatedly was upheld.

Addition of Interest on Advances Given:
The contention regarding the addition of interest relatable to advances given was not pressed by the Ld. Counsel for the assessee. As a result, the Tribunal dismissed this ground as not pressed. The appeal of the assessee was partly allowed, with the Tribunal pronouncing the order on 25-02-2022.

This detailed analysis of the judgment covers the issues of valuation of shares, disallowance of Employees' Provident Fund contribution, and addition of interest on advances given, providing a comprehensive understanding of the Tribunal's decision on each matter.