GTV Sez Phase 1 Private Limited Vs Assessment Unit Face Less (ITAT Delhi)
Summary: The Income Tax Appellate Tribunal, Delhi Bench, considered a common batch of appeals filed by GTV SEZ Phase 1 Private Limited and the Revenue for Assessment Years 2013-14 to 2016-17. The assessee’s appeal for AY 2013-14 was treated as the lead case. The principal dispute for AY 2013-14 concerned the addition under section 56(2)(viib) in respect of share premium exceeding the fair market value.
The assessee was engaged in developing an Information Technology Special Economic Zone project at Gurugram and derived income from leasing commercial buildings constructed in the SEZ. It was a co-developer of the SEZ project. The project involved development of substantial commercial space and was funded through equity contributions from shareholders as well as borrowing from HDFC Bank. The assessee had issued shares at Rs 100 per share, including a premium of Rs 90 per share, to both resident and non-resident existing shareholders. The valuation was undertaken using the Discounted Cash Flow (DCF) method under Rule 11UA.
The Assessing Officer rejected the DCF valuation on the ground that the projected financial results did not correspond with the actual financial performance and that the assessee had incurred losses since inception. The AO instead applied the Net Asset Value method and made an addition under section 56(2)(viib) concerning shares issued to resident shareholders, while accepting the same Rs 90 premium for shares issued to non-resident shareholders. The CIT(A) upheld the action in principle but granted partial relief after adopting a different NAV figure. The source records the AO’s valuation figures at different stages as Rs 63 and, in the Tribunal’s subsequent discussion, Rs 73 per share, while the CIT(A) adopted Rs 82 per share.
