9911796707
TMI Blog2023 (8) TMI 1410X X X X Extracts X X X X X X X X Extracts X X X X ..... the FMV, there is no reason to tinker with the full value of consideration declared by the assessee. We notice that the AO did not accept the FMV computed under Rule 11UAA of Income tax Rules for the reasons that (a) the value under Net Asset value method has been arrived at by considering the Balance Sheet as on 31.3.2017, while it should have been computed on the basis of Balance Sheet as on 30-11-2017, i.e., the date of transfer. (b) the value under DCF method has been arrived at by the valuer on the basis of information provided by the management, which is not supported by any cogent material. Accordingly, in the facts and circumstances of the case, we are of the view that the AO was not legally justified in tinkering with the Full value of consideration declared by the assessee and accordingly arriving at long term capital gains and short term capital gains. Accordingly, we set aside the order passed by the AO on this issue and direct him to accept the full value of consideration declared by the assessee and accordingly compute the capital gains/loss. Decided in favour of assessee. - Shri B.R. Baskaran (AM) Shri Pavan Kumar Gadale (JM) For the Appellant : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has sold all the shares at Rs.7,094/- per share 30.11.2017, i.e., within a period of less than one and half month. Accordingly, he questioned the assessee as to how the value of shares was reduced by 50% within short span. Accordingly, he proposed to re-compute the capital gain by adopting Fair Market Value of shares at Rs.14,361/- per share. The assessee submitted that the sale value of shares has been determined on the basis of valuation report obtained by it from M/s Finshore Management Services limited, who had valued the shares under Discounted Cash Flow (DCF) method and arrived at the value of Rs.7,094/- per share. It was further submitted that the Fair market value of shares is required to be determined as per Rule 11UAA of Income tax Rules, only when the sale consideration received or accruing to the assessee is less than the Fair market value. It was submitted that the above said subsidiary company was continuously making losses. Hence the Fair Market value determined under the above said rule (Net asset method) has worked out at a negative value of (-) Rs.630.29 per share, whereas the value of shares was arrived at Rs.7,094/- per share under DCF method. Accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of shares other than quoted share and hence, sec.50CA is applicable in this case, which states that the AO can substitute Fair market Value (FMV) in the place of full value of consideration , if the consideration received or accruing is less than the FMV. He submitted that the FMV is required to be computed as per Rule 11UAA. He submitted that the FMV computed as per above said rule was negative value of (-) Rs.630.20 per share. However, the assessee has sold the shares at Rs.7,094/- per share which is far more than the FMV. Accordingly, he submitted that there is no reason to invoke the provisions of sec.50CA of the Act. 8. The Ld A.R submitted that barring sec.50CA, there is no other provision in the Act, by virtue of which the AO could substitute Full value of consideration declared by the assessee. Accordingly, he submitted that the AO was not justified in adopting the sale consideration of shares at Rs.14,361/- per share and Ld DRP was not justified in confirming the same. Accordingly, he submitted that the addition made by the AO is liable to be deleted. In support of his arguments, the Ld A.R placed his reliance on the following case laws:- (a) CIT vs. George Hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghtly rejected by the AO. He submitted that the Tribunal may restore the matter back to the file of AO for examining the FMV again as done in the case of M/s Town Essential P Ltd vs. CIT (ITA No.139/Bang/2020 dated 30-06-2021). 11. In the rejoinder, the Ld A.R submitted that there is no much improvement in the book value of shares between 31.3.2017 and 31.3.2018. He submitted that the book value of share was negative figure, while the value arrived at under DCF method is 13 times more than the book value. Accordingly, he submitted that there is no proper reason to disbelieve the full value of consideration declared by the assessee. 12. We heard rival contentions and perused the record. We notice that the AO has disbelieved the sale consideration determined on 30-11-2017, by way of an agreement entered with the buyer at a price of Rs.7,094/- per share, only for the reason that the assessee had purchased the very same shares at price of Rs.14,351/- prior to about one month only. The reason of the AO appears to be that no prudent businessman will sell the shares at more than 50% discounted price. However, it was submitted by Ld A.R that the shares have been sold to an independ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee that there is no much difference in the financial position between 31.3.2017 and 31.3.2018. It is the submission that the FMV as on 30-11-2017 or 31-3- 2018 will not exceed the sale price of Rs.7,094/- per share. With regard to the second defect, it was submitted that the assessee could get sale price of Rs.7,094/- per share, which was many times more than the value arrived at under Net asset value method and hence there is no reason to suspect and reject the valuation done under DCF method. In our view, the above said explanations of the assessee are reasonable and we find that the tax authorities have not disproved the above said explanations given by the assessee. 15. Accordingly, in the facts and circumstances of the case, we are of the view that the AO was not legally justified in tinkering with the Full value of consideration declared by the assessee and accordingly arriving at long term capital gains and short term capital gains. Accordingly, we set aside the order passed by the AO on this issue and direct him to accept the full value of consideration declared by the assessee and accordingly compute the capital gains/loss. 16. In the result, the appeal filed ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
