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TMI Blog2024 (7) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... hartered Accountant who is the statutory auditor of the assessee company, and for the purpose of 11UA (2), the accountant certifying the FMV cannot be an auditor appointed by the company for the purpose of sec. 44AB of the I.T. Act. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that in clause (ii) of Explanation (a) to section 56(2)(viib) provides for the Assessing Officer to adopt the FMV as may be determined under Rule 11UA or as may substantiated by the company to the satisfaction of the Assessing Officer. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that the Assessing Officer has rejected the value furnished by the company as the difference between the FMV computed by the company based on the current value of fixed assets and as per 11UA was very high. Further, the company has been incurring only losses consistently and hence the Assessing officer was not satisfied with the DCF valuation report furnished by the assessee. 5. On the facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that the company was incurring heavy losses and had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termined by the merchant banker or an accountant who is not appointed by the company as an auditor under section 44AB of the Act under section 224 of the Companies Act, 1956 (1 of 1956). In the instant case, the valuation is done by the company's statutory auditor/Chartered Accountant who is appointed for the purpose of 44AB. The fair market value per share of the assessee company computed as per net asset value method by the Assessing Officer is negative [-38.13/share]. Accordingly, the Assessing Officer made addition at Rs. 35,000, shares 450 amounting to Rs. 1,57,50,000, as disallowance under section 56(2)(viib) of the Act. Share issued Face Value Premium Per Share Total Capital Share Premium 3,12,980 100 - 3,12,98,000 - 35,000 100 450 35,00,000 1,57,50,000 3,47,980 3,47,98,000 1,57,50,000 Aggrieved by the assessment order of the Assessing Officer, the assessee filed appeal before CIT(A). 4. The learned CIT(A) held that assessee company holds 7 Acres of industrial land in the MIDC area of Nagpur. The impugned land was allotted in the year 2009 and it is recorded in the books of accounts of the assessee at a historical price of Rs. 90,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered valuer's report. 6. The learned Authorised Representative had relied upon the order passed by the learned CIT(A) and pleaded that no interference is called for. 7. We have heard the arguments of rival parties, perused the material available on record and gone through the orders of the authorities below. As could be seen from the above facts and circumstances of the case, it is now necessary to refer to the certificate for computing fair market value per share as per assessee's a copy of which is placed at Paper Book Pate no.22, which is reproduced below:- "Certificate To Whomsoever it may Concern I have verified the books of accounts and relevant records of Vedsidha Products Pvt Ltd, Nagpur upto 04/10/2012. On the basis of said verification I hereby certify that the fair market value of per shares of said company as on 01/04/2012 is Rs. 23530/- (Twenty three thousand five hundred and thirty only). The basis of said valuation is as under:- Assets At Market Value Land (As Certified by Registered Valuer) 56400000/- Cash in Hand 28507/- Deposits 8779/- Bank Balances 47206/- Total (A) 56484492/- Liabilities Unsecured Loans 8950000/- Provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived 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- (1) by a venture capital undertaking from a venture capital company or a venture capital fund 75[or a specified fund]; or (ii) by a company from a class or classes of persons as may be notified by the Central Government in this behalf: [Provided further that where the provisions of this clause have not been applied to a company on account of fulfilment of conditions specified in the notification issued under clause (ii) of the first proviso and such company fails to comply with any of those conditions, then, any consideration received for issue of share that exceeds the fair market value of such share shall be deemed to be the income of that company chargeable to income-tax for the previous year in which such failure has taken place and, it shall also be deemed that the company has under reported the said income in consequence of the misreporting referred to in sub-section (8) and sub-section (9) of section 270A for the said previous year.] (a) the fair market value of the shares shall be the value- (1) ..... 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