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TMI Blog2021 (11) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... ot appreciating the legislative intent behind insertion of clause (viib) to section 56(2) of the Act. 3. The only issue raised by the assessee is that the learned CIT-A erred in partly confirming the order of the AO by treating the amount of share premium as income under the provisions of section 56(2)(viib) of the Act instead of giving full relief. 4. The facts in brief are that the assessee in the present case is a private limited company and engaged in the business of trading of flexible intermediate bulk container, woven sacks, woven fabric, multilayer films and bags, webbings, master batches, multifilament yearn etc. The assessee in the year under consideration has issued 1,56,970 equity shares @ 128 per share comprising face value of Rs. 10 and premium of Rs. 118 to groups concerns i.e. Champalal Group of Companies owned by Parekh Family and individual within the group. Accordingly the assessee has recorded the amount of share premium for Rs. 1,85,22,460/- in its books of accounts. The price of share was determined based on valuation certificate from chartered accountant namely JAGDISH HIRANI & ASSOCIATES dated 15th March 2014, who valued the share at Rs. 127.28 per share b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e certificate given by the professional person, there is a disclaimer and confidentiality clause which says that" we have also not physically valued the assets and the liabilities of the company. Consequently, the management of the company will be solely responsible from the reasonableness and reliability of the information and explanation furnished to us." In view of the above, the assessee cannot exonerate itself from the correctness and completeness of the certificate issued by the professional person on the basis of data provided by the assessee company. 4.7 In view of the above discussion, the certificate produced by the assessee company is not in commensurate with the financial back ground, growth and profitability of the company. To bring the amount of premium of Rs. 127.28, the Chartered Accountant brought a magical hypothetical figure of Rs. 2,36,15,000/- as projections as at 31.03.2017 by way of change in working capital without any base and contrary to the facts and circumstances of the case of the assessee. Accordingly, the certificate produced by the assesses is not reliable, genuine and not based on the facts and figure of the assessee company, hence, it is not acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... giving opportunity to explain just picked one figure of valuation report prepared by an expert within the framework of law, rejected the entire report and made addition of entire premium. Even assuming valuation report was not accepted then he should have to reach at his own valuation in accordance with provision of rule 11UA(2)(a) which would have come at Rs. 95 per share. Hence he was unjustified in disallowing entire share premium. The assessee further reiterated its legal submission that the objective of the statute should also be looked. 6.2 The learned CIT (A) after considering the submission of the assessee as well assessment order was pleased to provide partial relief i.e. allowed share premium upto Rs. 89/- by observing as under: The "appellant company has issuel3~T56\970^ shares of face value of Rs. 10/- at a premium of Rs.l 18/-. The appellant company in support of share premium has submitted CA certificate under Rule 11UA certifying the share premium of Rs.l 17.28 per share by discount cash flow method. The AO after considering the projection made by the CA for Financial Years 2014- 15, 2015-16 & 2016-17 has concluded that projection made are far from the actual res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the share premium to the extent of Rs. 89/- is justified. The AO has made disallowance of entire share premium which is against the rules and provisions of section 56(2] (viib). AO is therefore directed to allow share premium @ 89/- per share on total share of 1,56,970/- which comes to Rs. 1,39,70,330/-. Balance amount of Rs. 45,52,130/- is confirmed u/s. 56 (2) (viib). 7. Being aggrieved by the order of the ld. CIT-A, the assessee is in appeal before us. 8. The learned AR before us filed paper book running from pages 1 to 94 and submitted that the shares have been issued on the amount of premium which was determined by a qualified chartered accountant as required under the provisions of rule 11 UA(2)(b) of Income Tax Rule. The same cannot be disturbed by the AO. In this connection the AR relied on the judgment of Hon'ble Bombay High Court in the case of Vodafone M-Pesa Ltd. reported in 256 Taxman 240 and order of Hon'ble Jaipur tribunal in case of Rameshwaram Strong Glass (P.) Ltd reported in 172 ITD 571. 8.1 The learned AR further submitted that the project report which was used by the chartered accountant in the valuation of shares was not furnished before the authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf or by calling for a final determination from an independent valuer to confront the petitioner. However, the basis has to be the DCF Method and it is not open to him to change the method of valuation which has been opted for by the assessee. 10.2 However, we find that it was the duty of the assessee to furnish the necessary details based on which the fair market value of the shares was prepared. But in the case before us we find that the assessee has not filed the project report based on which the valuation of shares was determined by the qualified chartered accountant. However, the same has been filed before us with the prayer to restore the issue to the file of the AO for fresh adjudication. To our mind, it is necessary for the authorities below to consider the impugned project report for determining the market value of the shares so that the amount of premium could be justified. 10.3 Besides the above, we also note that the alternate contention raised by the assessee for determining the fair value of shares on the basis of the method as provided under clause (a)(ii) of explanation (a) to section 56(2)(viib) of the Act subject to the satisfaction of the AO, is a legal content ..... X X X X Extracts X X X X X X X X Extracts X X X X
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