Case Law Details
Keva Industries Pvt. Ltd Vs ITO (ITAT Mumbai)
We find that there is no dispute that the assessee company had acquired the shares of a foreign company from its directors. We also find the provisions of section 56(2)(viia) of the Act refers to transaction of acquisition of any property being shares of a company not being a company in which public are substantially interested. Since foreign company does not fall in the above category, the provisions of Section 56(2)(viia) of the Act cannot be said to apply to the above transaction. In any case, at the cost of repetition, the ld AO ought not to have considered the balance sheet as on 31.12.2014 for determining the value per share using NAV method , in view of the fact that the Rule specifically provides that balance sheet as on the date of valuation i.e 11.2.2015 should be considered for valuation. Rule 11 U defines valuation data as the date on which the property or consideration, as the case may be, is received by the assessee. Since the shares were acquired by the assessee company on 11.2.2015 (being the valuation date) , the valuation arrived at by the ld AO relying on financial statements as on 31.12.2014 deserves to be ignored and disregarded as not being in consonance with the Rule.
We hold that the provisions of section 56(2)(viia) of the Act cannot apply to a foreign company as the relevant Rule 11U which defines “balance sheet” was not applicable to a foreign company. We find that the amendment in this regard was brought in Rule 11U with effect from 1.4.19 under Rule 11U(b)(ii) of the Rules. This amendment is only prospective in nature and cannot apply to the year under appeal.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal in ITA No.1703/Mum/2019 for A.Y.2015-16 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-24, Mumbai in appeal No.CIT(A)-24/ITO-15(2)(1)/IT-242/2017-18 dated 11/03/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 29/12/2017 by the ld. Income Tax Officer-15(2)(1), Mumbai (hereinafter referred to as ld. AO).
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