Principal Chief Commissioner of Income-tax-1 Vs A.H. Multisoft Pvt. Ltd. (Delhi High Court)
Delhi High Court held that valuation of unquoted equity shares held by the assessee by Discounted Cash Flow [DCF] method is permissible under rule 11UA(2) of the Income Tax Rules. Accordingly, appeal of revenue dismissed.
Facts- Revenue has preferred the present appeal mainly contesting that ITAT has erred in deleting the addition of Rs.30,37,53,712/- as per the provisions of Section 56(2)(viib). It is also contested that ITAT has erred in ignoring the facts that the Assessing Officer has clearly outlined the defects in the calculation as well as methodology adopted by the assessee for the valuation of shares. Further, the Explanation under clause vii(b) states the purposes of the said clause that the fair market value of the shares shall be the value (i) as maybe determined in accordance with such method as may be prescribed or (ii) as may be substantiated by the company to the satisfaction of the Assessing Officer.
Conclusion- Held that the Assessee had valued the unquoted equity shares held by the Assessee in SAFL by DCF method. The same is permissible under Rule 11UA(2) of the Rules.
ITAT had found that the disclaimers set out by the expert in the valuation report were general disclaimers and are common in all such reports furnished by experts as they are founded on the data as provided by the entity. The expert report could not be rejected on the ground of such disclaimers without the AO pointing out any material error in the data as used by the expert. Thus, no substantial questions of law arise for consideration of this court in the facts of the present case. The appeal is accordingly dismissed.
