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TMI Blog2022 (9) TMI 868X X X X Extracts X X X X X X X X Extracts X X X X ..... rom Finance Act, 2017 for adopting the stamp duty valuation but since, it is curative and beneficial provision, it has to be given retrospective effect. We hold that the Net Asset Method as adopted by the assessee on the basis of the Stamp Duty Valuation is in order, being beneficial provision and covered by the judgment in the case of Shiv Pal Singh Chaudhary [ 2018 (7) TMI 1850 - PUNJAB HARYANA HIGH COURT] and further in the case of Kolkata Export Co. [ 2018 (5) TMI 356 - SUPREME COURT] - We further opine that even the valuation by the Discounted Cash Flow Method is in order - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... value of shares shall be the value, as may be substantiated by the company to the satisfaction of the Assessing Officer and which aspect has totally been ignored by the CIT(A). 4. Notwithstanding the above said ground of appeal, the Ld.CIT(A) has failed to take into consideration the valuation as calculated by the appellant at the rate of Rs. 117.31 per share by taking the value of the land of the company as per the circle rate as on 31.03.2014 in view of the amended provisions, which ought to have been considered by the Ld. CIT(A) being the provision in the nature of beneficial provision, has to be taken into consideration as clarificatory in nature as substituted by the Income Tax Rule, 2017. 5. That the above ground of appeal is fortified by the judgement of the Hon'ble Delhi High Court in the case of Ansal Land Mark Township (P) Ltd as reported in (2015) 61 taxman.com 45 (Del), in which it has been clearly been held that the beneficial provision has to be considered as clarificatory in nature and, therefore, the CIT(A) has erred in not taking into consideration such amended rules relevant to the year under consideration and, therefore, the CIT(A) has erred in not tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue (FMV) of the unquoted equity shares for the purpose of section 56(2)(viib) of the Act shall be the value as determined in accordance with such method as may be prescribed. It was submitted that the prescribed methods of valuation are given under Rule 11 UA and that the relevant extract of the same is 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). or (b) The fair market value of the unquoted equity shares determined by a merchant banker or an accountant as per the Discounted Free Cash Flow method Hence the law has specifically conferred an option upon the assessee that for the purpose of S. 56(2)(viib) of the Act an assessee can adopt any of the methods mentioned u/r 11UA(2) of the Rules. From Rule 11UA, it is clear that either the Break Up Value Method (Clause 'a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... especially, when the Act allows the assessee to choose one of the two methods. 3.7 It was further argued that, though, the assessee has submitted valuation as per the 'Discounted Cash Flow Method' and then, alternatively, had submitted that even the 'Net Asset Method' could also be applicable and the valuation of the land of the company was taken as the Stamp Duty Valuation as on the date of issue of shares, then also, the valuation of the 'unquoted shares' comes to Rs. 117.31 per share as per the page 5 of the assessment order and, thus, the shares issued at the valuation of Rs. 110/- per share were in order and no interference was called for. 3.8 It was further brought to our notice by the Ld. AR that Rule 11UA had been amended vide Finance Act, 2017 and now the Stamp Duty Value of the Immovable Property had been prescribed by the CBDT to be adopted and it was further argued that though this amendment was made vide Finance Act, 2017 but the same is curative and beneficial in nature and, therefore, it should be given retrospective effect and, for that, reliance was placed on the following judgments for the preposition that, any amendment which is curative in nature and is a bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iib) of the Income Tax Act, 1961 and the Ld. AR has also conceded that the application of provision of Section 56(2)(viib) is in order, but the dispute is only with regard to the method to be adopted for the purpose of valuation of unquoted shares. 6.1 It is a fact on record that the assessee has furnished the valuation on the basis of 'Discounted Cash Flow Method' and on the basis of the 'Net Asset Method' by adopting the stamp duty valuation of the immovable property as on 15.03.2014, for which, necessary evidences have been furnished but the AO and the Ld. CIT (A) are of the view that the book value of the shares has to be adopted which comes to Rs. 101.62/- per share against the value of Rs. 110/- per share and which is less than the value as per 'Net Asset Method' and the value as per the 'Discounted Cash Flow Method'. 6.2 It is also a fact that the AO/ Ld. CIT (A) have not been able to find any fault in the 'Discounted Cash Flow Method' and for the 'Net Asset Method', though, the Amendment came from Finance Act, 2017 for adopting the stamp duty valuation but since, it is curative and beneficial provision, it has to be given retrospective effect as per the binding judgment a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on such income, assessee would not be treated to be a person in default and presumption would arise in his favour-Second proviso to s. 40(a)(ia) was declaratory and curative in nature and should be given retrospective effect from 1st April, 2005-CIT(A) had rightly decided issue in favour of assessee which was upheld by ITATRevenue's appeal dismissed IV. Judgment in the case of PCIT vs. Perfect Circle India Pvt. Ltd. reported in (2019) 104 CCH 0008 Mum HC in which it has been held as under: "Section 40(a)(ia) is not a penalty and proviso is declaratory and curative in nature and would have retrospective effect from 1.4.2005 i.e., the date from the main proviso 40(a)(ia) itself was inserted-Revenue's appeal dismissed." V. Order in the case of DCIT vs. Aditya Construction Company India Pvt. Ltd. in ITA No. 1701/Hyd/2016 dated Oct 27, 2017, in which it has been held as under: "Held, second proviso to section 40(a) (ia) was inserted by Finance Act 2012 with effect from 1st April 2013-Effect of said proviso was to introduce legal fiction where assessee failed to deduct tax in accordance with provisions of Chapter XVII B-Where such assessee was deemed not to be assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee. The Hon'ble High Court of Delhi in the case of Cinestaan Entertainment (P) Ltd v. ITO (supra) has upheld the findings of the Tribunal holding that the Revenue demonstrate that the methodology adopted by the assessee is not correct as the Assessing Officer had simply rejected the valuation of the assessee on the ground that performance did not match projections and it has failed to provide fair valuer of the shares. In the said case the Tribunal has deleted the addition holding that under section 56(2) (viib) read with rule 11UA the assessee has an option to do valuation of shares and determine fair market value either following DCF or net asset value (NAV) method and the Assessing Officer has no jurisdiction to substitute his own value in place of value so determined. The Jaipur Bench of the Income-tax Appellate Tribunal has held in the case of Rameshwaram Strong Glass (P.) Ltd. v. ITO [2018] 96 taxmann.com 542 (Jaipur) that since the assessee has prepared the valuation report as per the guidelines of the Institute of Chartered Accountants of India following DCF method considering plant capacity, industry and market conditions, sanctioning of loan by bank, there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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