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TMI Blog2022 (8) TMI 1416X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of the shares. The mere fact that the shares were issued after 1st April 1981 also at face value cannot negate its fair market value. When shares are issued by a company at face value, it does essentially imply that the market value of shares already issued does not exceed the face value of these shares; the reasoning adopted by the Assessing Officer is simply fallacious and proceeds on the unrealistic assumption that the issue price of the shares reflects their fair market value. In any event, if the Assessing Officer had any doubts on the correctness of valuation, it was open for him to refer the matter to the Departmental Valuation Officer, but that exercise has not been done, and the relevant financial period is more than a decade old. No other issues are raised by the authorities below with respect to the method adopted for the valuation of shares in question. We uphold the plea of the assessee, and direct the Assessing Officer to adopt the valuation of Rs 3,833 computed by the assessee on the basis of the fair market value of the net assets. The assessee gets the relief accordingly. - ITA No. 5795/Mum/2016 - - - Dated:- 26-8-2022 - PRAMOD KUMAR, VICE PRESIDENT A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was admittedly acquired prior to 1st April 1981. While computing the capital gains on the sale of these shares, the assessee took the cost of acquisition of Rs 100 each for the SCPL equity shares acquired after 1st April 1981, but, so far as the 225 equity shares acquired prior to 1st April 1981 are concerned, the cost of acquisition was taken as fair market value as on 1st April 1981 which was stated to be Rs 3,833. This valuation was done by dividing the net fair market value of the assets of the SCPL (i.e. Rs 7,66,80,100) by the total number of equity shares (i.e. 20,000). The fair market value of the shares, as on 1st April 1981, was duly supported by the report of Shah Shah, Government Approved Valuers, for the valuation of land held by the company- which was its most valuable asset. The Assessing Officer, however, rejected this claim on the assessee, and observed as follows: 5. The assessee s contentions are considered but cannot be acceptable for the following reasons. 1. The assessee has stated that the value of one of the major assets of the company i.e. land should be taken as the base for determining the Fair Market Value of the shares of Somani and Co. The com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn of 1980 was made available that stated the value of the share of Somani and Company to be Rs 105. This further strengthens the claim that the assessee has suo motu decided to artificially inflate the value of shares by arbitrarily valuing land and equating it with the value of shares instead of following the recommended method or valuation. 6. The assessee has also quoted an ITAT case law in the case of Mrs. Shashi Dhamnidharka ITA No.5314/Mum/2008. The fact and circumstances in this case are different from the case cited for the reasons clearly mentioned above. 4. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. He confirmed the stand of the Assessing Officer and observed as follows: 3.3.6. The appellant s reliance on the judgment in the case of Mrs. Shashi Dharnidharka is misplaced for the following reasons- 1) The facts of the case are different from the appellant s case as in that case the appellant followed the net asset method but in the instant case, the appellant took the value of one of the assets of the company and not the net worth. 2) With due respect to the Hon ble ITAT, it is observed that the Hon ble ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial decisions discussed supra. In fact, there is not much of difference between the value disclosed by Shri. Vinay Somani in the WT returns and the value adopted by the AO which is also the FMV in 1985-86 and 2006-07. Therefore, the valuation made by the AO is upheld and the addition made on account of this valuation is confirmed. This ground of appeal is dismissed. 5. The assessee is not satisfied and is in further appeal before us. 6. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 7. We find that there is no dispute that the shares were acquired before 1st April 1981 and that the assessee had the option to substitute its cost of acquisition by the fair market value as on 1st April 1981. The assessee has filed a Government Approved Valuer report evidencing its fair market value of the land held by the SCPL, and, taking into account the same, computation of the fair market value as on 1st April 1981 on the basis of the intrinsic value of the SCPL shares. The intrinsic value of shares, particularly in the case of the closely held private limited companies, is, in our c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, turns on the same, nor can these provisions, therefore, be pressed into service as of now. No doubt, the provisions of rule 1 D of the Wealth Tax Rules could, at best, be of good guidance, but that is still a step short of the legal force. In any event, if the Assessing Officer had any doubts on the correctness of valuation, it was open for him to refer the matter to the Departmental Valuation Officer, but that exercise has not been done, and the relevant financial period is more than a decade old. No other issues are raised by the authorities below with respect to the method adopted for the valuation of shares in question. In view of these discussions, and on the peculiar facts of this case, we uphold the plea of the assessee, and direct the Assessing Officer to adopt the valuation of Rs 3,833 computed by the assessee on the basis of the fair market value of the net assets. The assessee gets the relief accordingly. 8. As we have upheld the main plea of the assessee, all other issues raised by the assessee are dismissed as infructuous. 9. In the result, the appeal is allowed in the terms indicated above. Pronounced in the open court today on the 26th day of August 2022 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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