ACIT Vs Addverb Technologies Pvt. Ltd. (ITAT Delhi)
ITAT Delhi held that addition on account of section 56(2)(viib) of the Income Tax Act unsustainable as shares are issued at rate lower than market value of shares determined by the AO.
Facts- Revenue has preferred the present appeal contesting that CIT(A) has erred in deleting disallowance of Rs. 3,95,014 made on account of proportionate interest expenditure and deleting addition of Rs. 25,09,76,959 made on account of section 56(2)(viib) of the Income Tax Act.
Conclusion- Held that disallowed interest payment of Rs. 3,95,014/- is TDS deducted and paid by the assessee in respect of said loan. The CIT(A) after examining the issue deleted the addition. No document controverting findings of the CIT(A) are brought on record by the Revenue. We find no infirmity in findings of the CIT(A)on this issue. Hence, the same are upheld.
Held that in the instant case, the assessee had issued shares having face value of Rs. 10/- per share at a premium of Rs. 4262.31 per share as against the market value of shares determined by the AO adopting NAV method Rs. 7426/- per share. Thus, the provisions of section 56(2)(viib) of the Act are not attracted in the present case. The AO disputed valuation of shares under DCF method which is one of the approved methods under Rule 11U and 11UA of the Income Tax Rules, 1962 and recomputed the value of equity shares following NAV method. Though the AO cannot tinker with the valuation report unless it is fundamentally flawed, without going further into merits of valuation, even, if the market value of shares as determined by AO is accepted the provisions of section 56(2)(viib) of the Act are not attracted as the assessee had issued shares at a rate lesser than the market value determined by the AO.
