Case Law Details
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.
Section 56 allows the assessees to adopt one of the methods of their choice. But,the AO held that the assessee should have adopted only one method for determining the value of the shares.In our opinion,it was beyond the jurisdiction of the AO to insist upon a particular system, especially the Act allows to choose one of the two methods.Until and unless the legislature amends the provision of the Act and prescribes only one method for valuation of the shares,the assessees are free to adopt any one of the methods.Therefore,in our opinion the order of the FAA does not suffer from any factual or legal infirmity.
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“FMV” – as a concept, and its determination, – as applied to not just ‘shares’ but to property of any kind, or right in, – is the most dicey /dubious of all, by reason of being highly subjective ; as such, not, in the very nature of things, and by any logic or reasoning, amenable to a satisfactory ans acceptable for any purpose. That has proved to be so always , never otherwise !
For the latest innovative ideas incessantly conceived of by the North Block, and brought on the statute book, suggest to mindfully and consciously go through every other concept , directly or indirectly related /interconnected. One such Instance: CHAPTER X-A (of IT Act- Sec 95 to 102 – containing the dreadful GA-AR)
Cross Refer :Previous on topics of, – besides GA-AR – “Transfer Pricing”, “Related Party”, “Indirect Transfer” et – al.