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TMI Blog2023 (1) TMI 669X X X X Extracts X X X X X X X X Extracts X X X X ..... based on the value of share goodwill etc. whichever is higher. He has further noted that it is at the option of the assessee to choose between the value determined on the basis of formula prescribed for determining the fair market value of the unquoted share as per rule 11UA or the Fair Market Value worked out by the merchant banker as per discounted free cash flow method. He given a finding that the assessee has opted for working of fair market value of the shares which was duly supported by the report of Chartered Accountant/valuer. AO has not brought on record any material on record to counter the submissions made by the assessee - working of fair market value by AO at Rs. 340.22 per share on the basis of the book value disregarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he A.O. assessee carried the matter before the Ld. CIT(A) who vide order dated 19.12.2018 granted substantial relief granted of the assessee. 3. Aggrieved by the order of the Ld. CIT(A), the Revenue is now in appeal and has raised the following ground:- 1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in law and in facts in deleting the addition made u/s. 56(2) (viib) of the Act when the Assessing Officer had rejected the valuation of shares as per discounted cash flow method applied by the assessee on the grounds of being unfounded and not supported by any substantive facts. 4. During the course of assessment proceedings AO noticed that assessee had allotted 1,05,200 equity shares of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eafter at para 4.6 of the order worked out the fair market value of each share at Rs. 340.22 and accordingly worked the excess premium at Rs. 159.78 per share and treated aggregate sum of Rs. 1,68,08,856/-(Rs 159.78 x 1,05,200 shares) to be the income u/s. 56(2) (viib) of the Act, and accordingly made its addition. 5. Aggrieved by the order of AO assessee carried the matter before Ld. CIT(A). CIT(A) after considering the submissions of the assessee deleted the addition made by AO by observing as under: 7.3 The further reply by the appellant was not considered and fair market value as given by the appellant has been rejected which was based on the DCF valuation without any cogent material on record. The AO has taken the book value as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rking out the fair market value of shares duly supported by report of a Chartered Accountant / Valuer. 7.7 On the other hand, AO has not provided any sound reasoning or not brought on record any material to counter the argument or to negate the submissions of the appellant. She has only taken the book value for the fair market value, though it is at the option of the appellant. Since appellant has adopted the higher value, therefore, it cannot be denied of the working without any reasoning. 7.8 Looking into the facts and circumstances of the case and in law, considering the factual position in this case and valuation report etc. it is held that there is no case by the AO to take the FMV @ 340.22 per share, on the basis of book v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect to the addition made by AO u/s. 56(2) (viib) of the Act, which was deleted by Ld. CIT(A). We find that Ld. CIT(A) while deleting the addition made by AO has given a finding that the reply of the assessee and the fair market value based on DCF valuation given by the assessee was rejected without any cogent material on record. He has further noted that as per the provision of section 56(2) (viib) the fair market value shall be as per value determined in accordance with the method prescribed or as substantiated by the company based on the value of share goodwill etc. whichever is higher. He has further noted that it is at the option of the assessee to choose between the value determined on the basis of formula prescribed for determinin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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