ACIT Vs Dhruv Milkose Pvt. Ltd. (ITAT Delhi)
Summary: The Revenue filed an appeal before the Income Tax Appellate Tribunal (ITAT), Delhi, challenging the order of the Commissioner of Income Tax (Appeals) [CIT(A)] for Assessment Year 2015-16, which had deleted an addition of ₹4,09,11,014 made by the Assessing Officer (AO) under Section 56(2)(viib) of the Income Tax Act. The addition related to share premium received by the assessee company on the allotment of 9,223 equity shares with a face value of ₹10 each at a premium of ₹4,435.76 per share to its holding company, M/s. SunEdison Solar Power India Pvt. Ltd., which held 100% of the assessee’s equity after the allotment.
During scrutiny, the AO rejected the Discounted Cash Flow (DCF) valuation method adopted by the assessee and instead applied the Net Asset Value method under Rule 11UA. The AO concluded that the share premium exceeded the fair market value and treated the premium amount as deemed income under Section 56(2)(viib).
Before the CIT(A), the assessee explained that it had established a solar power plant and had received the share application money from its holding company in an earlier financial year. The shares were subsequently allotted using a valuation based on the DCF method supported by a professional valuation report. The assessee also pointed out that the holding company had purchased the remaining 9% shares from another shareholder during the same year at nearly the same price per share, indicating that the issue price reflected the fair market value. It further argued that Rule 11UA permits the assessee to choose either the DCF method or the Net Asset Value method and that the AO could not substitute one prescribed method with another merely because he preferred a different valuation approach.
