Sunstone Learning Pvt. Ltd. Vs DCIT (ITAT Delhi)
Share Premium Addition Unsustainable Without Finding Defects in DCF Report; Protective Addition Under Section 68 Invalid in Same Assessee’s Hands; ITAT Deletes ₹4.14 Crore Share Premium Addition Because AO Ignored Prescribed DCF Method; Section 68 Protective Addition Quashed Because No Doubt Existed About Taxability; Fair Market Value Cannot Be Reworked Without Rebutting DCF Valuation; ITAT Relies on Delhi HC Rulings to Delete Excess Share Premium Addition.
The Income Tax Appellate Tribunal (ITAT), Delhi, allowed the appeal filed by Sunstone Learning Pvt. Ltd. for Assessment Year 2014-15 against the order of the Commissioner of Income Tax (Appeals)-28, New Delhi dated 14.12.2018 passed under Section 143(3) of the Income Tax Act, 1961.
The dispute related to additions made by the Assessing Officer under Section 56(2)(vii)(b) and Section 68 of the Act concerning share premium received by the assessee. The assessee had received total share premium of Rs.4,19,65,494 from two investors, namely M/s Omnia Education Pvt. Ltd. and Rabani Garg, against issuance of 3230 shares having face value of Re.1 per share with a premium of Rs.1299 per share.
To justify the valuation, the assessee furnished a valuation report prepared under the Discounted Cash Flow (DCF) method prescribed under Rule 11UA of the Income Tax Rules. The Assessing Officer, however, observed that the valuation report was based on fake or bogus estimates and held that the fair market value adopted by the assessee was not acceptable. He determined the fair market value of the shares at Rs.16.47 per share and consequently made an addition of Rs.4,14,33,414 under Section 56(2)(vii)(b) on substantive basis.
