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TMI Blog2020 (8) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... ities cannot force the assessee to adopt particular method for valuing the fair market value of the share especially when Rule 11UA(1)(c)(b) provides that it is the option of the assessee to chose any method either discounted or book value method for estimating the fair market value of the shares issued by it during the relevant financial period. In this case, the assessee has adopted the discounted free cash flow method as prescribed under Rule 11UA (2)((b) of the Act. Jaipur Bench of ITAT in the case of Safe Decore Pvt Ltd. [ 2018 (2) TMI 1274 - ITAT JAIPUR] has held that the assessee cannot be denied the benefit of discounted free cash flow method only because the consideration amount was received much before Rule 11UA(2) came into f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e circumstances of the case and in law, the ld CIT(A) is right in law in holding that the assessee is entitled to value the shares as per the provisions of Rule 11UA (2)(b) inserted w.e.f 29.11.2012 when the assessee had received the consideration amount towards issue of shares prior to 29.11.2012 ? 3. The relevant facts, as emerged from the order of the CIT(A), are that the assessee, during the relevant previous year had issued 2,00,000 equity shares of face value of ₹ 10/- to one M/s. Enbee Resources (P) Ltd. on 7.1.2013 at ₹ 180/- per share which included premium of ₹ 170/- per share. On being asked by the AO to explain the basis of valuation of equity shares for issuing at a premium of ₹ 170/- against the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of share was received after 29.11.2012, the AO is not justified to reject the fair market value calculated as per discounted free cash flow method prescribed under Rule 11UA(2)(b) of the Act. It was also contended that the discounted free cash flow method is a well recognized method for valuation of shares which could be adopted for valuation of shares even before insertion of Rule 11UA(2). 5. After considering the submissions of the assessee, the ld CIT(A) deleted the addition by observing as under: I have considered the matter carefully and perused the facts on record. I have also gone through the elaborate written submissions of the assessee. The AO has refused to accept the valuation of shares as per the discounted free cash flow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt is required to be taxed u/s.56(2)(viib). Hence, the addition of ₹ 2,61,56,000/- is deleted. 6. Ld Departmental Representative (DR) submitted that since Rule 11UA(2) was inserted w.e.f. 29.11.2012 and the assessee had received the consideration amount towards issue of shares prior to 21.11.2012, the provisions of Rule 11UA(2) were not applicable in the case of the assessee and, therefore, the market value of the shares was required to be determined as per Rule 11 UA(1)(c)(b) and not as per Rule 11UA(2), Ld DR submitted that, accordingly, the AO adopted the fair market value of the shares at ₹ 49.22 per share and taxed the excess receipt of ₹ 130.78 as income of the assessee to be taxed u/s.56(2)(viib) as income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be made in the hands of the assessee u/s.56(2)(viib) of the Act. Therefore, the findings recorded by ld CIT(A) may kindly be upheld. 9. We have heard the rival submissions and perused the relevant materials placed on the record of the Tribunal. In this case, the assessee had issued 2,00,000 equity shares of face value of ₹ 10/- to One M/s. Enbee Resources Pvt Ltd., on 7.1.2003 at ₹ 180/- per share which included premium of ₹ 170/- per share. It is the explanation of the assessee that since the fair market value as per the valuation in accordance with Rule 11ua (2)(B) was ₹ 189/- and the assessee had issued shares at ₹ 180/- including premium of ₹ 170/-, which is less than the fair market value, n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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