Section 56(2)(viib) deals with the consideration received by a ...

Tax Tribunal Upholds Fair Market Value Adjustment for Share Premium Assessment u/s 56(2)(viib.

September 7, 2024

Case Laws     Income Tax     AT

Section 56(2)(viib) deals with the consideration received by a company for issue of shares at a premium. The assessee company issued equity shares at a premium, which was questioned by the tax authorities. The key points are: The assessee is entitled to modify the net asset value (NAV) to determine the fair market value (FMV) of shares, as per the Explanation to Section 56(2)(viib). The assessee produced a valuation report and market valuation of its subsidiary to substantiate the FMV. Reworking the subsidiary's value using methods like discounted cash flow (DCF) is permissible if the valuation is correctly established. The tax authorities erred in not allowing modification of NAV components. The assessee's approach to determine FMV based on the subsidiary's valuation is in line with Section 56(2)(viib). The ITAT allowed the assessee's appeal on this issue.

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