Case Law Details
M/s. Innaccel Technologies Private Ltd. Vs ACIT (ITAT Bangalore)
The A.O. was of the view that the shares of the company have been over valued and accordingly asked the assessee to justify the valuation. After considering the explanations of the assessee, the A.O. took the view that the valuation report has been prepared on the basis of projected financial statements, which deviate widely vis-a-vis actual financials. Accordingly, the A.O. rejected the valuation report of the assessee. Then the A.O. proceeded to determine the valuation of the shares under net Asset value/Book value method prescribed under rule 11UA of the I.T. Rules. The A.O. calculated the value of shares at Rs.253.56 per share. Accordingly, he took the view that the Share premium amount should have been Rs.243.56 per share. Accordingly, the AO determined excess share premium collected by the assessee at Rs.3,74,90,118/- and assessed the same as income of the assessee u/s 56(2)(viib) of the Act.
Held by ITAT
we are of view that the issue with regard to valuation has to be decided afresh by the AO on the lines indicated in the decision of ITAT, Bangalore in the case of VBHC Value Homes Pvt.Ltd., Vs ITO (supra) i.e.,
(i) the AO can scrutinize the valuation report and he can determine a fresh valuation either by himself or by calling a determination from an independent valuer to confront the assessee but the basis has to be DCF method and he cannot change the method of valuation which has been opted by the assessee.
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