Sec. 56(2)(viib) Assessee can adopt a method of his choice to determine FMV of shares transferred

DCIT Vs M/s. Ozoneland Agro Pvt.Ltd. (ITAT Mumbai)

Assessee had issued 1941 equity shares to SPL at premium of Rs.25,749/- per share,that face value of the share was Rs.10/- ,that the assessee had received total share premium of Rs.4.99 crores from an unrelated party,that the share premium was charged on the basis of a valuation report wherein the shares were valued as per the DCF method,that in earlier year the AO had accepted the similar valuation,that the assessee had also carried out project analysis by an Estate Consultant Firm,that the AO held that NAV method of valuation was to adopted for valuation of the shares.Thus,the basic issue to be decided is validity of the method to be adopted to value the share price for the year under consideration.As stated earlier,the assessee had adopted DCF method as per the provisions of section 56(viib)r.w.rule 11UA(2)whereas the AO was of the opinion that NAV method was appropriate method,as envisaged by Rule 11 UA(c)(b)of the Rules.

In our opinion,the valuation has been left to the discretion of the assessee.In other words the AO cannot adopt a method of his choice.In the case under consideration the whole controversy has arisen because of the AO has rejected the method adopted by the assessee.