2023 (5) TMI 908

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... account of share premium receipt u/s 56(2)(viib) of the I.T. Act, 1961 despite the fact that the valuation report submitted by the assessee company was not substantiated by the assessee company?. 2. "Whether on the facts and in the circumstances of the case and the Ld. CIT(A) erred in deleting the addition of Rs.3,40,297/- on account of disallowance of ESOP expenses without appreciating the fact that year of the vesting period in which ESOP was to be allowed was not clear, in the ESOP scheme submitted by the assessee." Apropos the issue of Share Premium 3. Brief facts of the case are that the assessee company is a software company developing and promoting Indian Languages technologies with emphasis on language localization of websites, .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... external, and over which it may have only nominal or notional control. As such the projections can and do invariably deviate whereby the actual performance in the future may vary, even significantly, from the projections. Accordingly, considering the benefit of hindsight based on the actual subsequent performance cannot be the basis for rejecting the DC valuation. The projections on the basis of which the DC based valuation was arrived at was correct at the time at which it was made, and which factor is relevant for determining the applicability or otherwise of section 56(2)(viib) and whether subsequent performance has measured upto the projections used therein. However, the above arguments were not found acceptable by the Assessing Office .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... assessee submitted that the ld. CIT(A) has passed a well reasoned order. 8. Upon careful consideration, we note that the assessee has used recognized discounted cash flow method. This is duly recognized method as per section 56(2)(viib) of the Act read with rule 11UA of the Income Tax Rules. The AO has rejected this method by comparing the subsequent performance with the projections by claiming that this was not correct. However as noted by the Ld. CIT(A) that the AO's rejection of the DCA value on the basis of variation between the projections used for arriving at the DCF valuation and the subsequent performance is not correct. The Ld. CIT(A) has passed a well reasoned order and rightly relied upon the order of the ITAT in the case of Cin .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X