DCIT Vs Aathmika Holdings Pvt. Ltd. (ITAT Chennai)
Rule 11UA prevails over third-party price – ITAT Chennai deletes ₹832 Cr addition u/s 56(2)(x) on Share Purchases
Chennai ITAT dismissed Revenue’s appeal & upheld CIT(A)’s deletion of huge addition of ₹832.05 crore made u/s 56(2)(x) in respect of purchase of shares of IG3 Infra Ltd & ETL Power Services Ltd.
Assessee, an investment holding company, acquired 5.92 crore IG3 shares @ ₹12.43 and 18.43 crore ETL shares @ ₹14.30 from Green Grid Group Pte Ltd (Singapore). AO, relying on TPO’s benchmarking & a contemporaneous third-party deal where IG3 shares changed hands @ ₹29.48, held that purchase price was below FMV. He recomputed FMV under Rule 11UA at ₹30 (IG3) & ₹53.95 (ETL), and taxed the differential u/s 56(2)(x).
Before CIT(A), Assessee produced an updated valuation report (based on audited balance sheet as on transaction date 08.08.2020) showing FMV at ₹11.989 (IG3) & ₹13.41 (ETL). Since purchase price exceeded FMV as per Rule 11UA, no addition was warranted. CIT(A) accepted this, observing that reliance on negotiated third-party price was contrary to statutory rules.
ITAT upheld CIT(A), holding that Section 56(2)(x) mandates FMV to be determined strictly per Rule 11UA(1)(c). No alternate method (including third-party price or transfer pricing ALP) can substitute.
