DCIT Vs Kissandhan Agri Financial Services Pvt. Ltd. (ITAT Delhi)
Income Tax Appellate Tribunal (ITAT) Delhi dismissed the appeal filed by the Revenue against Kissandhan Agri Financial Services Pvt. Ltd. concerning the assessment year 2016-17. The case revolved around the valuation of shares issued by the assessee to its holding company, M/s. Sohan Lal Commodities Management Pvt. Ltd. The Assessing Officer (AO) had rejected the fair market value (FMV) determined using the Discounted Cash Flow (DCF) method and instead applied the Net Asset Value (NAV) method, resulting in an addition of ₹36.03 crore under Section 56(2)(viib) of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) [CIT(A)] ruled in favor of the assessee, leading to the Revenue’s appeal before ITAT.
The AO contended that the projections used in the DCF method did not align with the company’s actual financial performance. He, therefore, relied on the NAV method, which yielded a lower FMV of ₹11.54 per share compared to ₹22.21 per share determined by the assessee’s Chartered Accountant. However, CIT(A) held that the DCF method was a valid approach under Rule 11UA of the Income Tax Rules and that the AO did not provide sufficient justification for rejecting the assessee’s valuation. The CIT(A) noted that the valuation report was prepared by an independent auditor and followed prescribed guidelines.
