Mandatory valuation methods for shares u/s 56(2)(viib) to be followed.

The ITAT ruled that for determining the fair market value of shares under section 56(2)(viib) of the Income Tax Act, it is mandatory to use the valuation methods prescribed under rules 11U and 11UA. The valuation report submitted by the taxpayer, which employed methods like future earning analysis and adjusted net asset method not allowed under these Rules, was correctly rejected by the Assessing Officer (AO). However, the ITAT instructed the AO to remove the addition made by treating the share premium and share capital as income, as the taxpayer fulfilled its obligation by providing a valuation report according to the prescribed Rules. The decision favored the taxpayer. .....

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