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TMI Blog2023 (9) TMI 797X X X X Extracts X X X X X X X X Extracts X X X X ..... f the relevant sections read with the Rules, we are of the view that the action of the AO in substituting the method of valuation is beyond jurisdiction. DCF Method is based on projections which are based on factors like growth of the company, economic/market conditions, business conditions, expected demand and supply, cost of capital and host of other factors. These factors are considered based on some reasonable approach and they cannot be evaluated purely based on arithmetical precision as value is always worked out based on approximation and catena of underline facts and assumptions. Nevertheless, at the time when valuation is made, it is based on reflections of the potential value of business at that particular time and also keeping ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue is that the ld. CIT(A) erred in deleting the addition of Rs. 8 crores made by the Assessing Officer u/s 56(2)(viib) of the Income-tax Act, 1961 [the Act, for short] holding that the DCF Method is the correct method for valuation of shares. 3. Representatives of both the sides were heard at length. Case records carefully perused. Relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules. 4. Briefly stated, the facts of the case are that the assessee company is a part of Max Group of hospitals. The assessee is a subsidiary company of Max Healthcare Institute Ltd [MHIL], which is a subsidiary of Max India Ltd. 5. Return for the year under consideration was filed on 29.09.2005 declaring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned addition. 11. We have given thoughtful consideration to the orders of the authorities below. There is no dispute that the valuation of the assessee is supported by valuation report from a technical expert who has adopted DCF method, which is one of the recognized methods u/r 11UA of the Rules. Therefore, the Assessing Officer erred in rejecting the method. 12. On a perusal of the relevant sections read with the Rules, we are of the view that the action of the Assessing Officer in substituting the method of valuation is beyond jurisdiction. We are of the view that DCF Method is based on projections which are based on factors like growth of the company, economic/market conditions, business conditions, expected demand and supply, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed methodology. The Appellant-Revenue had the option to conduct its own valuation and determine FMV on the basis of either the DCF or NAV Method. The Respondent-Assessee being a start-up company adopted DCF method to value its shares. This was carried out on the basis of information and material available on the date of valuation and projection of future revenue. There is no dispute that methodology adopted by the Respondent-Assessee has been done applying a recognized and accepted method. Since the performance did not match the projections, Revenue sought to challenge the valuation, on that footing. This approach lacks material foundation and is irrational since the valuation is intrinsically based on projections which can be affected by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is not satisfied in the present case, as the Respondent-Assessee adopted a recognized method of valuation and Appellant-Revenue is unable to show that the assessee adopted a demonstrably wrong approach, or that the method of valuation was made on a wholly erroneous basis, or that it committed a mistake which goes to the root of the valuation process. 14. In view of the foregoing, we find that the question of law urged by the Appellant-Revenue is purely based on facts and does not call for our consideration as a question of law. 15. For the foregoing reasons, the appeal is dismissed along with pending application. 16. Considering the facts of the case in totality, in light of the decision of the Hon'ble Delhi High Court [sup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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