DCIT Vs Spectra Realities Private Limited (ITAT Mumbai)
NAV Method Cannot Be Tampered -AO’s 15% Haircut Called ‘Misdirected’ – ITAT Confirms Premium as Per Valid CA Valuation – Revenue’s Rs.8.70 Cr Addition Collapses
Revenue challenged deletion of addition u/s 56(2)(viib) relating to premium on Non-Cumulative Redeemable Preference Shares. Assessee had issued 22,34,700 preference shares at Rs.100 FV with Rs.220 premium, supported by valuation reports of two CAs adopting NAV method as permitted u/r 11UA(1)(c)(c). AO accepted NAV but reduced valuation by applying 15% illiquidity discount based on SEBI MF/UTI guidelines & relied on Microfirm Capital decision.
Tribunal held that Rule 11UA(1)(c)(c) prescribes no formula & only requires a valuation report from Merchant Banker/CA; NAV adopted by assessee & even by AO yielded almost identical value (difference of only Rs.0.08), & once NAV is chosen, an alien modification such as illiquidity discount cannot be injected. Tribunal also observed that SEBI MF valuation norms do not apply to unlisted preference share valuation u/s 56(2)(viib), & Microfirm Capital (where DCF was used by both sides) cannot be extrapolated to a NAV-based case. Tribunal upheld CIT(A)’s view that AO “misdirected himself”, rejected illiquidity discount, & confirmed deletion of addition of Rs.8.70 crore in both appeals. Revenue’s appeals dismissed.
