PCIT-1 Vs Etawah Chakeri (Kanpur) Highway Private Limited (Delhi High Court)
The Delhi High Court dismissed the Revenue’s appeal under Section 260A of the Income Tax Act, 1961 against the ITAT order dated 12.09.2023 concerning Assessment Year 2013-14. The assessee, incorporated in December 2011, had entered into a Concession Agreement with NHAI on 05.03.2012 for construction of the Etawah-Chakeri section of NH-2. On 29.08.2012, it allotted 1,00,00,000 shares of Rs.10 each at a premium of Rs.90 per share to its parent companies. The valuation was supported by a Chartered Accountant’s report dated 31.05.2012 using the Discounted Cash Flow (DCF) Method.
The Assessing Officer questioned the DCF valuation and considered the Net Asset Value (NAV) Method under Rule 11UA of the Income Tax Rules, 1962 read with Section 56(2)(viib) of the Income Tax Act. He determined the DCF value at negative Rs.525.16 crore and made an addition of Rs.90 crore under Section 56(2)(viib) read with Section 2(24).
The CIT(A) allowed the assessee’s appeal, holding that Explanation (a) to Section 56(2)(viib) permitted the assessee to adopt a prescribed method or another method to the satisfaction of the AO, and found the DCF valuation justified. The ITAT affirmed the decision, observing that DCF was a recognised valuation method and that the assessee had discretion in adopting a valuation method.
