Case Law Details
MobiCom Technologies Pvt. Ltd. Vs ITO (ITAT Bangalore)
Introduction: The case of MobiCom Technologies Pvt. Ltd. vs. ITO (ITAT Bangalore) revolves around the contentious issue of share premium. This article delves into the details of the case to shed light on the legal proceedings and the rationale behind the tax authorities’ decision.
Detailed Analysis: The appeal, filed by MobiCom Technologies, challenges an order passed by the National Faceless Appeal Centre (NFAC), Delhi, arising from an earlier decision by the Income Tax Officer (ITO), Ward No. 4(1)(4), Bangalore. The ITO’s decision, made under section 143(3) of the Income Tax Act, 1961, pertains to the assessment year 2016-17. The crux of the matter is the addition of Rs. 1,04,50,000 under section 56(2)(viib) of the Act. This addition is based on the ITO’s determination that the share premium received by MobiCom Technologies exceeded the fair market value of the shares issued.
MobiCom Technologies, a company engaged in providing software development services, filed its return of income, declaring a loss of Rs. 9,40,028 for the assessment year in question. The company did not claim startup status as defined by the Department of Industrial Policy and Promotion (DIPP) and did not provide any certificate to substantiate such a claim.
During the scrutiny assessment, the ITO issued notices under section 143(2) and 142(1) to MobiCom Technologies. It was discovered that the company credited a sum of Rs. 1,14,95,000 under the security premium reserve account. Additionally, MobiCom Technologies allotted 1045 shares with a total value of Rs. 10,45,000 (at Rs. 1,000 per share) and treated the remaining Rs. 1,04,50,000 as share premium. The shares, each valued at Rs. 1,000, were issued at a premium of Rs. 10,000 to Shri Rathan Kumar. The company also provided a valuation report by an accountant. However, the valuation method used, based on the Discounted Cash Flow (DCF) approach for future growth estimation, did not align with Rule 11UA of the IT Rules, as per the Assessing Officer’s assessment.
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Author Bio
please check your conclusion with the order’s conclusion. I am a bit confused.