Eduwizards Infosolutions Private Limited Vs DCIT (ITAT Delhi)
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) allowed the appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals), NFAC, relating to Assessment Year 2018-19. The dispute arose from an addition of ₹3,30,09,600 made under Section 56(2)(viib) of the Income Tax Act.
The assessee, engaged in providing home and online tutoring services, had originally issued Zero Coupon Unsecured Compulsorily Convertible Debentures (CCDs) to a resident investor in an earlier assessment year and had received funds amounting to ₹3,32,33,850 at that stage. During the relevant assessment year, these CCDs were converted into 2,24,250 equity shares of face value of ₹10 each at a premium of ₹1,472 per share. The assessee supported the share premium with a valuation report prepared under the Net Asset Value (NAV) method prescribed under Rule 11UA, using figures from the audited balance sheet as on 31.03.2016.
The Assessing Officer rejected the valuation report on the ground that, since the shares were allotted on 08.06.2017, the valuation should have been based on the balance sheet as on 31.03.2017. The Assessing Officer recalculated the fair market value using the 31.03.2017 figures, treated the premium as nil, and added the entire premium amount under Section 56(2)(viib). The CIT(A) upheld this action.
