Jet Synthesys Private Limited Vs ACIT (ITAT Pune)
Pune ITAT Deletes ₹44.80 Crore Angel Tax Addition; AO Cannot Replace Assessee’s DCF Valuation with NAV Method
In a major ruling on Section 56(2)(viib), the Pune ITAT deleted an addition of ₹44.80 crore made towards share premium, holding that once an assessee validly opts for the Discounted Cash Flow (DCF) method under Rule 11UA, the Assessing Officer cannot discard that method and substitute it with the Net Asset Value (NAV) method merely because he disagrees with the valuation.
The assessee, Jet Synthesys Pvt. Ltd., had issued 2 lakh equity shares at a premium of ₹2,240 per share to Pratithi Investment Trust, an independent investor associated with Infosys co-founder Kris Gopalakrishnan, and received ₹45 crore. The valuation was supported by a Chartered Accountant’s report adopting the DCF method. The Assessing Officer rejected the DCF valuation as unrealistic, adopted the NAV method, arrived at a negative share value, and treated the entire share premium of ₹44.80 crore as taxable income under section 56(2)(viib).
The Tribunal observed that Rule 11UA specifically grants the assessee the option to choose the method of valuation, and while the Assessing Officer may examine the assumptions and workings of the valuation report, he cannot replace the chosen DCF method with another valuation methodology of his own choice. If the valuation report is found defective, the AO may undertake a fresh valuation using the same method, but cannot switch to NAV.
The Tribunal further noted that the investment had been made by an independent and reputed investor, whose identity, creditworthiness and genuineness were never doubted. Notices issued under section 133(6) were duly complied with and all supporting details were furnished directly to the Department. The Tribunal also took note of the fact that in a subsequent scrutiny assessment, the Department itself had accepted the assessee’s DCF-based valuation for a later year involving an even higher share premium.
Relying on decisions of the Delhi High Court in Agra Portfolio and Cinestaan Entertainment, the Bombay High Court in Vodafone M-Pesa, and several Tribunal rulings, the ITAT held that projections used in DCF valuation cannot be rejected merely because actual future results differ from estimates. Valuation has to be examined based on facts and assumptions available on the valuation date and not with the benefit of hindsight.
Accordingly, the Tribunal held that the addition of ₹44.80 crore under section 56(2)(viib) was unsustainable and directed its deletion.
FULL TEXT OF THE ORDER OF ITAT PUNE
The above 2 appeals filed by the assessee are directed against the separate orders dated 06.11.2025 of the Ld. CIT(A) / NFAC, Delhi relating to assessment years 2016-17 and 2018-19 respectively. Since identical grounds have been raised in both the appeals, therefore, these appeals were heard together and are being disposed of by this common order for the sake of convenience
