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TMI Blog2025 (1) TMI 1335X X X X Extracts X X X X X X X X Extracts X X X X ..... is clearly flawed. CIT(A) directed Ld. AO to carry out valuation from two valuers, at the option of the assessee and restricted the scope of enquiry which cannot be held to be justified. No option was given to Ld. AO to carry out valuation from independent valuers. It is quite clear that the valuation made by two valuers is much higher than the issue price of shares and the impugned addition has practically been deleted giving no option to Ld. AO. As rightly pointed out by Ld. CIT-DR, the report of CS Suresh has not considered the outstanding liability and the liabilities have been treated as share capital advance / share application money which is contrary to facts on record. CIT-DR also questioned the valuation of IEPL on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2024 for the AY 2016-17 is erroneous in law, facts and circumstances of the case. 2. The Ld. CIT(A) erred in holding that the addition made by the AO u/s 56(2)(viib) of Rs. 37.21 Crores by treating it as excess share premium is not correct, without appreciating that: a. the assessee company had received a loan of Rs. 37.23 Crores from one of the shareholders which was required to be reduced from the total value of assets while determining the value per share. b. The valuation of share carried out by V. Suresh is erroneous considering that the said loan liability of Rs. 37.23 Crores on the date of valuation was not reduced while determining the value per share on the pretext that the same is of the nature of share capital advance/share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Smt. Sasikala Raghupati at a premium of Rs. 36,990/- per share. The assessee submitted that the shares were allotted as per the fair market value (FMV) computed in accordance with Sec.56(2)(viib) read with Rule 11U / 11UA. In support of the same, the assessee furnished valuation report dated 24-02-2016 issued by a Chartered Accountant firm i.e., M/s Raghu & Gopal along with audited financial accounts. It also transpired that this money was not introduced in this year but it was given in earlier years as promoter's loans which were converted into equity share capital in this year. The valuer valued the share at Rs. 37073/- per share which is extracted in the assessment order. 3.2 However, Ld. AO did not accept the valuation on the ground th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hod or as may be substantiated by the company to the satisfaction of the Ld. AO based on the valuation of its assets on the date of issue of shares. Appellate Proceedings 4.1 The assessee assailed the addition before first appellate authority. It was submitted that entire shareholding was held by the mother and daughter. The conversion of loan into equity could not be brought within the scope of Sec. 56(2)(viib). The assessee referred to the decision of Tribunal in the case of its sister concern M/s Vaani Estates Pvt. Ltd. (ITA No.1352/Chny/2018) to bolster its submissions. 4.2 The Ld CIT(A), after considering the extant provisions of Sec.56(2)(viib), held that addition can be made in cases where the consideration received against issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made. Aggrieved, the revenue is in further appeal before us. Our findings and Adjudication 5. From the facts, it emerges that the assessee has received promoter loan of Rs. 37.18 Crores from Mrs. Sasikala Raghupati during the period from 10-01-2014 to 31-03-2014. A small loan of Rs. 15 Lacs has been received subsequently. Out of this, amount of Rs. 37.22 Crores has been converted into equity share capital on 24-03-2016 which include share premium of Rs. 37.21 Crores. The Ld. AO has brought the same to tax u/s 56(2)(viib). During the course of assessment proceedings, the assessee, on its own, furnished valuation report from a valuer by the name M/s. Raghu & Gopal (CAs). The valuer valued the shares based on "asset method", but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valuations. 7. We find that in terms of the extant provisions of Sec.56(2)(viib), it was the onus of the assessee to justify the valuation of shares. The report furnished by the assessee during regular assessment proceedings has not considered the loan liabilities and therefore, the same is clearly flawed. The Ld. CIT(A) directed Ld. AO to carry out valuation from two valuers, at the option of the assessee and restricted the scope of enquiry which cannot be held to be justified. No option was given to Ld. AO to carry out valuation from independent valuers. It is quite clear that the valuation made by two valuers is much higher than the issue price of shares and the impugned addition has practically been deleted giving no option to Ld. AO. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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