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TMI Blog2022 (1) TMI 1448X X X X Extracts X X X X X X X X Extracts X X X X ..... Market Value (FMV). Any consideration received by such issuing company in excess of the FMV, to the extent it exceeds the face value of such shall be liable to tax. In the instant case, neither the A.O. nor the CIT(A) has determined the fair market value of the shares issued by the assessee-company to ACT Digital in accordance with Rule 11UA. A.O. has merely taken face value of the shares as the deemed fair market value and the share premium was assessed as income from other sources u/s 56(2)(viib) of the I.T.Act. The provisions of section 56(2)(viib) to be invoked, necessarily the FMV has to be established as per one of the prescribed methods. Therefore, in order to determine the fair market value of the shares, the matter is referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act are effective only from AY 2013- 14 and would not apply in the current case of shares issued in AY 2011-12; c) That on the facts of the case and circumstances and in law, the Ld. CIT(A) has failed to appreciate that at the time of allotment of shares, the assessee was not required to obtain a share valuation report under the relevant provisions of the Act; d) That on the facts of the case and circumstances and in law, the Ld. CIT(A) has failed to appreciate that the Ld. AO has considered the entire share premium received by the Company as income from other sources without carrying out a specific valuation as required under section 56(2)(viib) of the Act; e) That on the facts of the case and circumstances and in law, the CIT(A) has faile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to Rs. 1,55,42,304 cannot be taxed u/s 56(2)(viib) of the I.T.Act since shares were issued in assessment year 2011-2012. However, the assessee did not produce any documentary evidence to support these were outstanding payments and the issue of shares were in the earlier years. Further, nowhere in the assessee s financial the said transaction has been taken into consideration in the earlier years. Therefore, the claim of the assessee that an amount of Rs. 1,55,42,304 received during the year under consideration is the outstanding amount towards share capital and share premium was rejected by the Assessing Officer. During the course of assessment proceedings, the assessee sought to justify the share premium by submitting some figures on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the company is treated as incorrect on account of the detailed discussion made above. Accordingly, the share premium of Rs. 1,54,54,79/- is treated as income from other sources. 4. Aggrieved, the assessee preferred an appeal to the first appellate authority. Before the first appellate authority it was submitted that the assessee has not issued any shares during the relevant assessment year and the provisions of section 56(2)(viib) of the I.T.Act introduced by the Finance Act, 2012 are effective from only assessment year 2013-2014 and will not be applicable in the case of the assessee, since the shares were issued in assessment year 2011-2012. It was further submitted that there was no requirement for the assessee to obtain the valuati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of hearing (inspite of the same, the assessee has not even engaged a Authorised Representative). 6. The learned Departmental Representative strongly supported the orders of the Income Tax Authorities. 7. We have heard the learned Departmental Representative and perused the material on record. Section 56(2)(viib) of the I.T.Act, 1961 was introduced in the Finance Act, 2012 which requires a company (issuer), not being a company in which the public are substantially interested, to issue shares at Fair Market Value (FMV). Any consideration received by such issuing company in excess of the FMV, to the extent it exceeds the face value of such shall be liable to tax. For the purpose of this section FMV shall be the value, higher of the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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