9911796707
TMI Blog2020 (12) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... to resident investors. The assessee thus collected share premium of Rs. 4.24 crores. The assessee furnished a valuation report in support of the share premium amount collected by it, wherein shares had been valued under discounted cash flow method (DCF method). 3. The A.O. was of the view that the shares of the company have been over valued and accordingly asked the assessee to justify the valuation. After considering the explanations of the assessee, the A.O. took the view that the valuation report has been prepared on the basis of projected financial statements, which deviate widely vis-avis actual financials. Accordingly, the A.O. rejected the valuation report of the assessee. Then the A.O. proceeded to determine the valuation of the shares under net Asset value/Book value method prescribed under rule 11UA of the I.T. Rules. The A.O. calculated the value of shares at Rs. 253.56 per share. Accordingly, he took the view that the Share premium amount should have been Rs. 243.56 per share. Accordingly, the AO determined excess share premium collected by the assessee at Rs. 3,74,90,118/- and assessed the same as income of the assessee u/s 56(2)(viib) of the Act. 4. The Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed by another co-ordinate bench in the case of Futura Business Solutions P Ltd (ITA No.3404 (Bang) 2018. For the sake of convenience, we extract below the observations made by the co-ordinate bench in the case of Future Business Solutions P Ltd (supra):- "17. With regard to the correctness of DCF method adopted by the Assessee for valuing shares and the procedure to be followed when such method of valuation is not accepted by the AO, the ld. counsel for the Assessee has drawn our attention of the ITAT, Bangalore Bench in the case of VBHC Value Homes in ITA No.2541/Bang/2019 order dated 12-06-2020. The Tribunal, after relying on the decision of the Hon'ble Bombay High Court in the case of Vodafone M-Pesa Ltd Vs Pr.CIT 164 DTR 257 and decision of the ITAT, Bangalore Bench in the case of Innovit Payment Solutions Pvt.Ltd., Vs ITO(2019) 102 Taxmann.com 59. held as follows: "9. We have considered the rival submissions. First of all, we reproduce paras 11 to 14 from the Tribunal order cited by learned AR of the assessee having been rendered in the case of Innoviti Payment Solutions Pvt. Ltd., Vs. ITO (supra). These paras are as follows: "11. As per various tribunal orders cited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the figures. This was an exercise which ought to have been done by the Assessing Officer and that has not been done by him. In fact, he has completely disregarded the DCF Method for arriving at the fair market value. Therefore, the demand in the facts need to be stayed." 12. As per above Para of this judgment of Hon'ble Bombay High Court, it was held that the AO can scrutinize the valuation report and he can determine a fresh valuation either by himself or by calling a final determination from an independent valuer to confront the assessee. But the basis has to be DCF method and he cannot change the method of valuation which has been opted by the assessee. Hence, in our considered opinion, in the present case, when the guidance of Hon'ble Bombay high Court is available, we should follow this judgment of Hon'ble Bombay High Court in preference to various tribunal orders cited by both sides and therefore, we are not required to examine and consider these tribunal orders. Respectfully following this judgment of Hon'ble Bombay High Court, we set aside the order of CIT (A) and restore the matter to AO for a fresh decision in the light of this judgment of Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as he has special knowledge and he is privy to the facts of the company and only he has opted for this method. Hence, he has to satisfy about the correctness of the projections, Discounting factor and Terminal value etc. with the help of Empirical data or industry norm if any and/or Scientific Data, Scientific Method, scientific study and applicable Guidelines regarding DCF Method of Valuation." 10. From the paras reproduced above, it is seen that in this case, the Tribunal has followed the judgment of Hon'ble Bombay High Court rendered in the case of Vodafone M-Pesa Ltd., Vs. Pr. CIT (supra). The Tribunal has noted that as per the judgment of Hon'ble Bombay High Court, it was held that AO can scrutinize the valuation report and he can determine a fresh valuation either by himself or by calling a determination from an independent valuer to confront the assessee but the basis has to be DCF method and he cannot change the method of valuation which has been opted by the assessee. The Tribunal has followed the judgment of Hon'ble Bombay High Court and disregarded various other Tribunal orders against the assessee which were available at that point of time. In the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed, the Assessing Officer does not have a choice to dispute the justification. The methods of valuation are prescribed in Rule 11UA(2) of the Rules. The provisions of Rule 11UA(2) reads as under:- "(2) Notwithstanding anything contained in sub-clause (b) of clause (c) of sub-rule (1), the fair market value of unquoted equity shares for the purposes of sub-clause (i) of clause (a) of Explanation to clause (viib) of sub-section (2) of section 56 shall be the value, on the valuation date, of such unquoted equity shares as determined in the following manner under clause (a) or clause (b), at the option of the assessee, namely:- (a) the fair market value of unquoted equity shares = where, (A-L) x (PV), (PE) A = book value of the assets in the balance-sheet as reduced by any amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act and any amount shown in the balance-sheet as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset; L = book value of liabilities shown in the balancesheet, but not including the following a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at Rs. 2,36,54,400/- for the F.Y.2012-13, Rs. 7,88,74,080/- for the F.Y.2013-14 and Rs. 14,00,00,000/- for the F.Y.2014-15, whereas the actuals as per the returns filed are Rs. 17,67,146/-, Rs. 4,50,06,477/- and Rs. 4,26,45,399/- only. In view of this, the growth rate of 12% is stated to be not acceptable. 4. The net profit has been projected at Rs. 30,94,769/- for the F.Y.2012-13, Rs. 1,29,86,330/- for the F.Y.2013-14 and Rs. 2,16,06,523/- for the F.Y.2014-15, whereas the actuals as per the returns filed are (-) Rs. 5,40,078/-, (-) Rs. 1,25,58,421/- and (-) Rs. 2,70,00,184/- only. 21. We are of the view that, the Assessing Officer has erred in considering the actuals of revenue and profits declared in the future years as a basis to dispute the projections. At the time of valuing the shares as on 16.04.2012, the actual results of the later years would not be available. What is required for arriving at the fair market value by following the DCF method are the expected and projected revenues. Accordingly the valuation is on the basis of estimates of future income contemplated at the point of time when the valuation was made. It has been clarified by the Assessee that the produ ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
