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TMI Blog2019 (6) TMI 1174X X X X Extracts X X X X X X X X Extracts X X X X ..... evious year. Since the assessee does not have any exempt income therefore no disallowance is warranted. That being so, we decline to interfere in the order passed by the Ld. CIT(A), his order on this issue, is hereby upheld and grounds raised by the revenue is dismissed. Addition of income from other sources u/s 56(2)(viib) - allotment of shares at a price which exceeds fair market value of the share and thus violated the provisions of section 56(2)(viib) - HELD THAT:- AO has observed that the assessee company has made allotment of 6,19,000 Equity Shares @ 42/- per share during the instant year at a price which exceeds fair market value of the share and thus the provisions of section 56(2)(viib) of the Act was violated. The fair market value on the basis of book value of company as on 31.03.2013 was calculated by ld. Assessing Officer at 25.55/- per share. Revaluation reserves need not be deducted while calculating the fair market value, as per rule 11UA(2) of the I.T. Rules. Considering all no infirmity in the order passed by the CIT(A) hence we dismiss the ground raised by the revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... cussing about intangible assets in form of goodwill, knowhow, patents, copyrights, trademark, license etc. to be taken into consideration referring the company being 29 years old and not examining the fact that such claim for valuation of share was not made by the assessee and thus, CIT(A) wrongly interpreted clause (iii) of Rule 11UA and allowed Revaluation Reserve of ₹ 22,78,35,159/- to be taken into account for determining the value of shares as per Rule 11UA while as per this clause, revaluation reserve being a reserve set apart towards depreciation should not have been taken into account. 6. That the department craves leave to add, alter or modify any grounds of appeal in the course of Appellate proceedings. 3. Ground nos. 1 and 2 relate to deletion of addition of ₹ 4,50,37,200/- u/s 14A read with Rule 8D. 4. Brief facts qua the issue are that the Assessing Officer made addition u/s 14A read with Rule 8D(2)(ii) at ₹ 4,20,67,584/- and under rule 8D(2)(iii) at ₹ 29,69,652/-. On appeal, the ld. CIT(A) deleted the addition made by Assessing Officer. Aggrieved the Revenue is in appeal before us. 5. The ld. DR for the revenue has filed written submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he written submission it have been categorically stated that the assessee has not earned / received any dividend or exempted income from its investment in order to qualify u/s 14A read with Rule 8D. The AR has also brought it on record that investments have been made by the company in purchasing shares of its subsidiary company and other group companies. In the assessment order the A.O. has discussed order of the Hon'ble Calcutta High Court in the case of CIT-III, Kolkata vs. RKBK Fiscal Services Pvt. Ltd. 358 ITR 288 (Cal). The AR has brought it on record that in the case of M/s RKBK Fiscal Services Ltd. case (supra), the company had earned dividend income but in the present case the assessee has not earned any dividend income. So, the ratio decided in the case of M/s RKBK Fiscal Services Pvt. Ltd. case (supra) is not applicable in the present case. The AR has also brought on record the case law of Redington (India) Ltd. vs. ACIT, Range-V, Channai [2017] 392 ITR 633 (Madras) (HC) wherein it was held that if there is no exempt income in relevant year, there cannot be a disallowance of expenditure u/s 14A. In this case the Hon'ble High Court has clearly held that in a year where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In conclusion, the provisions of section 14A, read with Rule 8D of the Rules cannot be made applicable in a vacuum i.e. in the absence of exempt income. The question of law are answered in favour of the assessee and against the department and the appeal allowed. [Para 16]" Since the assessee does not have any exempt income therefore no disallowance is warranted. That being so, we decline to interfere in the order passed by the Ld. CIT(A), his order on this issue, is hereby upheld and grounds raised by the revenue is dismissed. 9. Now we shall take ground nos. 3,4 and 5 raised by the assessee which relate to deletion of addition made on account of income from other sources u/s 56(2)(viib) of the Act of ₹ 1,01,82,550/-. 10. Brief facts qua the issue are that Assessing Officer during the scrutiny proceedings noticed that as per assessee's balance sheet as at 31.03.2015, it was apparent that M/s Jupiter International Ltd. has made allotment of shares in FY 2013-14 and 2014-15 at a price which exceeds fair market value of the share and thus violated the provisions of section 56(2)(viib) of the I. T. Act, 1961. The company has allotted 6,19,000 equity shares in FY 2014-15 at a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature". I think while calculating the fair market value, the AO has not taken into account the intangible assets being goodwill, know-how, patents, copy rights, trade marks, licences etc into consideration. The AR has brought it on record that this company is 29 years old compariy and it has its own reputation in the market that should have been taken into account as its intangible assets as per section 56(2)(viib)(ii). Accordingly, it should also have been taken into consideration while calculating/ determining the fair market value of shares of this company. I think the AO has not considered the mechanism provided under rule 11UA, subclause (iii) in its totality. In my view, sub-clause (ii) of section 56(2)(viib) has to be taken into consideration, while determining the fair market value of shares. Accordingly, assessee's appeal on ground no. 2 is allowed." 12. We have heard both the parties and perused the material a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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