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TMI Blog2019 (10) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... ils furnished by the assessee, we find the assessee had obtained permission of the competent authority for change of land use from agricultural to institutional for art, culture and convention centre for a total area of 42949 sq. mtrs or 51366.94 sq. yards. A perusal of the circle rate for such institutional area shows that the circle rate has been prescribed at 22,000/- per sq. yard. Thus, as per the circle rate prescribed by the competent authority, the value of total assets i.e., the fair market value of the land which was converted from agricultural into institutional comes to 113,00,72,749/-. If the other assets of 9,17,608/- is added to such asset and the total liability of 46,55,69,537/- is deducted, then, the net asset comes to 665,420,820/-. If the same is divided by the number of equity shares of 10,10,000/-, then, the value per share comes to 658.83 which is more than the premium of 5/- charged by the assessee on a share of 10/-. We, therefore, find merit in the argument of assessee that the valuation of the shares should be made on the basis of various factors and not merely on the basis of financials and the substantiation of the fair market value on the basis of the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total Liability/Total paid up value of the share 47,57,29,526 - 40,85,69,537/1,01,00,000 = 6.65 Total paid up value of equity shares of ₹ 10/- comes to ₹ 6.65." 4. He, therefore, asked the assessee to explain as to why the excess amount of premium over and above the value of the value per share should not be disallowed and added back to its income. In absence of any reply from the side of the assessee to justify such premium and considering the fact that it is a time barring case where the proceedings are going to be barred by time limitation, the Assessing Officer determined the excess value of such premium received over and above the fair market value of shares at ₹ 3,50,00,000/- under the provisions of section 56(2)(viib) of the IT Act and added the same to the total income of the assessee. 5. Before the CIT(A), the assessee filed certain additional evidences and submitted that in view of Rule 11UA of the Income Tax rules, 1962, the value should be ₹ 66.50 per share instead of ₹ 6.50 per share computed by the Assessing Officer. Based on the arguments advanced by the assessee, the ld.CIT(A) held that the correct fair market value per share com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all explained how the same would increase the fair value of the shares of the company and/or the quantum of such right on the value of the equity shares. Further, according to the certificate of the changes of land use permission, received from Directorate of Town & Country Planning, Haryana, the company has already paid some amount for such conversion in land use, which must be debited in the assets of the company, thereby increasing the value of their assets. Thus, in the absence of any explanation by the assessee regarding the quantum of effect of such commercial right over the value of equity shares of the company, the same cannot be considered, and accepted. Further, I have also considered the case laws relied upon by the appellant. The case laws relied upon by the appellant do not relate to the facts of the case. 6.10 In view of the fair market value of the equity shares as computed above and the consideration/ price at which the shares are issued, the company has received an excess consideration of ₹ 4.95 per equity shares, over and above the fair market value of the equity share i.e. (₹ 15 - ₹ 10.05). Thus, the total amount that should have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Haryana, vide letter dated 12th October, 2011 had granted change of land use on the basis of application of the assessee dated 2nd May, 2011 and 11th August, 2011 wherein they have permitted the assessee for setting up an institution for art, culture and convention centre over an area measuring 18,011.85 sq. mtr. Referring to page 27 of the paper book, he submitted that the Director of Town and Country Planning, Haryana, vide letter date 14th June, 2012 had granted change of land use permission for setting up an institution for art, culture and convention centre over an additional area of 24937.45 sq. mtr., situated in the revenue estate of village Maidawas. He submitted that the assessee had paid an amount of ₹ 31,42,119/- towards conversion charge and ₹ 48,19,448/- on account of 10% of the total external development charges. Referring to page 107 of the paper book, he submitted that the circle rate of the land w.e.f. 01.04.2011 has gone up to ₹ 22,000/- per sq. yard. He submitted that if the same is considered, the total cost of land comes to ₹ 113 crores and, therefore, the value per share comes to ₹ 658.33, the details of which are as under:- Part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and gave part relief of ₹ 3,50,000/- and sustained the addition of ₹ 3,46,50,000/- the reasons for which has been reproduced in the preceding paragraphs. It is the submission of the ld. counsel that the lower authorities have wrongly computed the fair market value of the shares on the basis of the book value ignoring the FMV of the land held by the company. It is the submission of the ld. counsel for the assessee that the value of its shares in terms of clause (ii) of Explanation (a) of section 56(2)(viib) on the basis of the value of its land at market value which is ₹ 113 crores comes to ₹ 658.83 per share. Therefore, it is the submission of the ld. counsel for the assessee that instead of taking the book value of the property at ₹ 47.81 crore as per the balance sheet, the lower authorities should have taken the fair market value of land which was converted from agricultural to institutional at ₹ 113,00,72,749/- and other assets of ₹ 9,17,608/-. Thus, according to him, the fair market value of the shares comes to ₹ 658.83 per share. 11. We find some force in the above argument of the ld. counsel for the assessee. The Explanation to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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