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TMI Blog2023 (2) TMI 417X X X X Extracts X X X X X X X X Extracts X X X X ..... t is towards the professional fee, which include monthly retainership fees for the professional services - HELD THAT:- It is an undisputed fact that the aggregate amount has been paid to Vineet K. Gupta Co. Chartered Accountant. We find that CIT(A) after considering the submissions made by assessee has given a finding that the expenses claimed by the assessee have been incurred during the regular course of business and cannot be treated as capital expenses. Before us, Revenue has not pointed to any fallacy in the findings of CIT(A).No reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed. - ITA No. 8523 / Del / 2019 - - - Dated:- 10-2-2023 - SH. ANIL CHATURVEDI , ACCOUNTANT MEMBER AND SH. YOGESH KUMAR US , JUDICIAL MEMBER For the Assessee : Shri K. M. Gupta , Adv. Shri Rishabh Malhotra , A. R. For the Revenue : Shri T. James Singson , CIT - D. R. ORDER PER ANIL CHATURVEDI , AM : This appeal filed by the Revenue is directed against the order dated 19.09.2019 of the Commissioner of Income Tax (Appeals)-3, New Delhi relating to Assessment Year 2016-17. 2. Brief facts of the case as culled out from the material on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Method (DCFM) to arrive at the value of each share. He noted that the assumptions taken by the CA for the purpose of valuation of shares was not based on any reliable facts and the figures taken at the time of valuation did not match with the actual figures and, that there was a huge difference between projected figures and actual figures considered for working out the value of shares. He, therefore, concluded that the assumptions taken for the purpose of valuation was not realistic and did not match with the actual financial condition of the assessee. He, thereafter, by following the method of calculation of valuation of shares as prescribed under Rule 11UA of the Incometax Rule, 1962, worked out the fair market value of each share at Rs.169.88/- per share and thus considered the difference of share premium Rs.1070.41 per share (Rs.1241.29 - Rs.169.88) multiplied by the number of shares issued as income from other sources taxable u/s 56(2)(viib) of the Act and thus made the addition of Rs.21,57,85,188/-. 7. Aggrieved by the order of AO, assessee carried the matter before CIT(A). Before CIT(A), assessee inter alia contended that the provision of Section 56(2)(viib) of the Act ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that provisons of Section 56(2)(viib) of the Act are not applicable in the case where the shares are issued to a VCF by a venture capital undertaking as per the proviso to section 56(2)(viib) of the Act. In this regard, the provisions of section 56(2)(viib) of the Act are reproduced as under: 56(2)(viib) where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares: Provided that this clause shall not apply where the consideration for issue of shares is received (iii) by a venture capital undertaking from a venture capital company or a venture capital fund; or (iv) by a company from a class or classes of persons as may be notified by the Central Govt. in this behalf. Explanation For the purposes of this clause (a) The fair market value of the shares shall be the value- (i) As may be determined in accordance with such method as may be prescribed 10; or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss activites. It is also an undisputed fact that the investor of the shares to whom the assessee had allotted shares was Forum Synergies India Trust who has been granted registration by Securities and Exchange Board of India as Venture Capital Fund on 30th Sep 2008 and the registration granted by the SEBI has not been withdrawn by the SEBI during the year under consideration. Provision of Section 56(2)(viib) of the Act provides that where the company which is not a company in which the public are not substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares which exceeds the face value of such shares when the aggregate consideration was received for such shares as exceeds the fair market value of the shares, shall be deemed to be the income of the concerned company chargeable to tax under the head income from other sources for the relevant financial year. We further find that proviso of Section 56(2)(viib) of the Act provides that the provision of Section 56(2)(viib) would not be applicable where the consideration for issuance of shares is received by a venture capital undertaking from a venture capital compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be not in the nature of routine business expenses but in the nature of capital expenses. He accordingly disallowed Rs.98,88,874/- which included Rs.1,36,000/- which is in dispute. 14. Aggrieved by the order of AO, assessee carried the matter before CIT(A). Before CIT(A), detailed submissions were made which have been reproduced by CIT(A) in his order. CIT(A) after considering the submissions made by the assessee granted partial relief to assessee by deleting the addition made on account of payment to Vineet Gupta and Co. and upheld the balance additions made by AO. While deleting the addition of the payment to Vineet Gupta and Co., CIT(A) held that the amount paid to Vineet K. Gupta Co. was for its professional service which also included the monthly retainership fees for the year and it was for the regular business expenses and therefore cannot be treated as capital expenses. He accordingly deleted the addition made by AO. Aggrieved by the order of CIT(A), Revenue is now before us. 14. Before us, Learned DR took us to the findings of AO and supported the order of AO. 15. Learned AR on the other hand reiterated the submissions made before the lower authorities and pointe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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