PCIT Vs I.A. Hydro Energy (P) Limited (Himachal Pradesh High Court)
The chief justice bench of HP High court was considering the issue in this case when shares were allotted at a premium of Rs 90/- per share to loan creditors whose balance was outstanding in the books. The DCF valuation was rejected by the AO as being bogus alleging no connection with actual affairs of the Company. It was argued by the assessee that the right to chose the method DCF or NAV method was with the assessee and as such the addition was without jurisdiction.
The Tribunal went further and observed that the Assessing Officer is not authorized to pick and choose a particular method of valuation of shares, since the option in that regard is specifically given only to the assessee as per Rule 11UA(2) of Income Tax Rules, that the AO can only verify method of valuation adopted by the assessee, but the same cannot be substituted by the AO by a different method i.e., NAV method, once the assessee has exercised option for the DCF valuation method.
It held that the Assessing Officer was not correct in rejecting the DCF method and proceeding to value the shares by NAV method merely on the ground that there was a huge difference in projected figures and actual results available for some years.
