Minda SM Technocast Pvt. Ltd Vs ACIT (ITAT Delhi)
1. In the present case, the assessee has acquired shares of TEPL at Rs.5 per shares. The shares were acquired by the assessee from three companies as discussed in the preceding paragraphs. The assessee claimed to have valued the shares of TEPL as per the provisions of Rule 11UA of the Rules and filed a copy of the report prepared by the Chartered Accountants in support his claim to justify the price of shares at which these were acquired. However, the Assessing Officer was of the view that the assets declared by the TEPL in its balance sheet should have been valued as per the circle rate while determining the value of the shares acquired by the assessee. Accordingly, the Assessing Officer determined the value of the shares at Rs. 45.72 per shares of TEPL. Thus, the difference of Rs. 40.72 was treated as income from other sources of the assessee under the provisions of Section 56(2)(viia) of the Act. The view taken by the Assessing Officer was subsequently confirmed by the learned CIT(A).
2. Now, the issue before us arises for our adjudication so as to whether the land shown by the TEPL should be taken as per the book value or as per the market value while valuing its shares.
3. On plain reading of provisions of Section 56(2)(viia), Explanation of Section 56(2)(vii) and provisions of 11UA of the Rule, it is revealed that while valuing the shares the book value of the assets and liabilities declared by the TEPL should be taken into consideration. There is no whisper under the provision of 11UA of the Rules to refer the fair market value of the land as taken by the Assessing Officer as applicable to the year under consideration. Therefore, we are of the view that the share price calculated by the assessee of TEPL for Rs. 5 per shares has been determined in accordance with the provision of Rule 11UA. In holding so, we find support and guidance from the judgment relied by the learned Authorized Representative in Sharukh Khan Vs. DCIT reported in 90 taxmann.com 284 (Bom) which has been discussed in the preceding paragraphs. Therefore, we have no hesitation in reversing the order of the lower authorities. Hence, the grounds of appeal of the assessee are allowed.
FULL TEXT OF THE ITAT JUDGMENT
The present appeal by the assessee is directed against the order of CIT(A)-6, Delhi, dated 16.10.2017. The assessee has raised the following grounds of appeal:
1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not deleting the addition of Rs.11,84,46,336/- fully as made by Ld. AO on account of alleged difference between value at which shares were purchased and value of shares as computed by Ld. AO purportedly under rule 11 UA and that too by recording incorrect facts and findings and without appreciating/considering the submissions and evidences filed during the course of appellate proceedings.
2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in rejecting the submission of assessee that AO has wrongly taken the book value of land at Rs. 16,78,65,600/- instead of Rs.6,32,75,332/- as claimed and has erred in sustaining the addition partly.
3. That in any case and in any view of the matter, order passed by AO & confirmed by CIT(A) thought partly are bad in law and against the facts and circumstances of the case.
4. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time ‘of hearing and all the above grounds are without prejudice to each other.
2. The interconnected issue raised by the assessee in all the grounds of appeal is that the ld. CIT(A) erred in confirming the order of the AO by sustaining the disallowances of Rs.11,84,46,336/- on account of undervaluation of shares.
3. Briefly states facts of the case are that the assessee in the present case is a limited company and deriving its income under the head ‘rental and interest income’. The assessee during the year under consideration has acquired shares to the tune of 48% of M/s. Tuff Engineering Pvt. Ltd. (in short ‘TEPL’) from certain companies as detailed under:
