Parasmani Gems Pvt. Ltd. Vs DCIT (ITAT Ahmedabad)
ITAT Ahmedabad held that disallowance under section 56(2)(viib) of the Income Tax Act sustained due to wide fluctuation in value of share within a period of less than 5 months and that too within same financial year without accurate explanation.
Facts- The assessee company is engaged in the business of manufacturing and trading of gold and diamond jewellery. The case of the assessee was selected for scrutiny under CASS. In the course of assessment, the AO found that the assessee had introduced funds by way of issue of share capital. AO found that on the face value of share of Rs.10/- allotted on 03.11.2012 premium of Rs.90 per share was charged, whereas the shares allotted on 26.03.2013 were issued at a premium of Rs.3 1.67 per share only. AO, therefore, required the assessee to justify the consideration for shares issued on 03.11.2012 in accordance with the provisions of Section 56(2)(viib) of the Income Tax Act, 1961.
AO was not satisfied with the working of the FMV of the shares. He, therefore, rejected the DCF method of valuation adopted by the assessee and worked out the value of the shares as per Net Asset Value (NAV) method, which worked out to Rs.34.55 share only. Accordingly, the AO held that the premium charged to the extent of Rs.55.45 (90-34.55) per share was excessive and accordingly the share premium of Rs.94,26,500/- was added u/s.56(2)(viib) of the Act. Further, vide rectification order, the disallowance u/s.56(2)(viib) of the Act was restricted to Rs.27,72,500/- only.
