9911796707
TMI Blog2022 (9) TMI 927X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that theassessee company was engaged in the business of investment in all Types of Shares, and Securities, Stocks etc. It was observed by Ld AO that the assessee has issued 63940 preference shares for Rs. 344/- per share and has received share premium to the tune of Rs. 1,05,88,464/- from M/s Alexure Securities Private Limited, out of which Rs. 165.60 per share has been called up. Assessee was asked vide notice issued u/s 142(1) dated 11.04.2016 & 07.03.2016 to furnished the detail of; "Large share premium received during the year (verify applicability of sec. 56{2}(viib)" 3. After taking the responses of assessee the Ld. AO made the addition with following findings :- "8. The reply of assessee was duly considered but found not acceptable because assessee itself is not convinced whether Rule 11 UA should be applicable to preference share or not. If it is not applicable then why he has received the share premium on issuance of preference share as per rule 11UA read with u/s 56(2) (vii b) of the IT Act and why at the time of issuance of preference shares assessee did not considered other provision and remedial action available, if ? No doubt, there may not be applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in law and on facts in sustaining an addition of a sum of Rs. 72, 12, 432/- under section 56(2)(viib) of the Act, which addition is based on complete misconception of the facts and on mis - appreciation of the provisions of the Act. 2. That in doing so, the learned Commissioner of Income Tax (Appeals) has failed to appreciate the basic fact that the provisions of section 56(2)(viib) are wholly inapplicable in respect of the aforesaid transaction (as the consideration was received in AY 2012-13) and further, the reliance placed on the said provision is based on a complete misreading of the same and thus, the addition so made is liable to be deleted. 3. That in doing so, the valuation report so furnished by assessee - appellant, wherein, the value per share was worked out at Rs. 354/- per share under Rule 11UA(l)(c)(c), by a professional accountant/ valuer has been arbitrarily discarded and rejected by lower authorities and that too by applying the wrong methodology as envisaged in the said Rule and thus, the valuation of share so adopted by lower authorities at Rs. 213/- per share is unjust, improper and needs to be rejected. The learned CIT(A) has also ignored the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that there is no estoppel against statute. 8. Ld. AR submitted that there is no legality in the findings of Ld. Tax Authorities below. It was submitted that assessee itself was not sure of the manner of valuation. 9. Giving thoughtful consideration to the matter on record, in regard to the pleas of the assessee that Ld. AO has wrongly applied the provisions of law on the basis of principles of estoppels, it comes up, that as such it is not one of the specific grounds raised but being a question of law, can be suitably considered to be falling under the general ground no. 1. Remaining grounds when taken along are based on same set of facts and law and cover the controversy as to if the tax authorities below have fallen in error and applied provisions of Rule 11 UA for the valuation of preferential shares issued for Rs. 344/- each and the valuation of Rs. 354/- per share is correct and the value would not be Rs. 213/- per shares. In this context, at the outset, it can be observed from the assessment order that Ld. AO was carried away by the fact that assessee has taken two different pleas with regard to valuation of preferential shares and that the assessee was itself not convinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd not "Preference shares" - As held Mumbai Bench in case of ACIT 16(1) Vs. M/s. Golden Line Studio Pvt. Ltd, [TS-8635-ITAT- 2018(Mumbai)-O]. 12. Now, the Rule 11UA(2), applied by the Ld Tax authority, is specifically applicable for the valuation of shares for the purpose of section 56(2)(viib) but covers only unquoted equity shares within its ambit and there in no reference to the preference shares. Thus, the only method for determining the FMV of the preference shares is Rule 11UA(1)(c)(c), which is reproduced herein below: "the fair market value of unquoted shares and securities other than equity shares in a company which are not listed in any recognized stock exchange shall be estimated to be price it would fetch if sold in the open market on the valuation date and the assessee may obtain a report from a merchant banker or an accountant in respect of which such valuation." 12.1 Thus the the Ld Tax authority below had fallen in error in applying method of valuation of unquoted equity on preferential shares and the possible correct method was to apply Rule 11UA(1)(c)(c) only. 13. Lastly, it can be observed that Ld. AO had arrived at valuation of Rs. 213/- on following basis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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