M/S. UNIWRAP SYSTEMS PVT. LTD.,VADODARA vs. THE ITO, WARD-2(1)(4)., VADODARA

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ITA 2555/AHD/2017Status: DisposedITAT Ahmedabad19 March 2019AY 2013-143 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the AO's addition, stating that the difference due to rounding off was negligible and did not warrant a change in the AO's calculation. The assessee's plea to round up the fair market value to Rs. 860 per share was not accepted.

What were the facts?

The assessee company issued shares with a premium. The fair market value of the premium, as per a valuation report, was Rs. 859.56 per share. The Assessing Officer (AO) added the difference between the actual premium charged and the fair market value, considering it as income from other sources.

What were the issues?

Whether the addition made by the AO under Section 56(2)(viib) on account of share premium, considering the fair market value as per a valuation report, is sustainable, especially when the difference arises from rounding off.

Which sections of the Income-tax Act were involved?

Section 56(2)(viib)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, AHMEDABAD – BENCH ‘SMC’

Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED

For Appellant: Shri Anil R. Shah, AR
For Respondent: Shri O.P. Pathak, Sr.DR
Hearing: 18/03/2019

PER RAJPAL YADAV, JUDICIAL MEMBER : Assessee is in appeal before the Tribunal against order of the ld.CIT(A)-2, Vadodara dated 28.8.2017 passed for the Asstt.Year 2013-14.

2.

In ground no.2, it has pleaded that the ld.CIT(A) has erred in confirming the disallowance of depreciation amounting to Rs.4,190/-. The ld.counsel for the assessee did not press this ground of appeal, hence, it is dismissed.

ITA No.2555/Ahd/2017 - 2 -

3.

In ground no.1, the assessee has taken three sub-grounds. It has pleaded that the ld.CIT(A) has erred in confirming the addition of Rs.2,42,640/- under section 56(2)(viib) of the Income Tax Act, 1961.

4.

At the time of hearing, the ld.counsel for the assessee has placed on record a chart showing details of addition of share premium. This chart reads as under: “Sub : Chart showing Details of Addition of Shares Premium 1) Shares Issued 6000 2) Face Value Rs.10 per share 3) Share Premium Rs.900 per share 4) Fair Market Value of Premium as per Valuation Report 859/56 per share 5) Difference on account of ‘Rounding off’ 40/44 6) Difference on Rounding off is 4.70% 7) Difference for 6000 shares Rs.2,42,640/- 8) Added by ITO in Asst. Order Rs.2,42,640/- 9) Confirmed by CIT(A) + Rs.2,42,640/- 10) Appeal to Hon. ITAT Note: 1) Rounding off is a Common Method followed in Commercial Practice. 2) Even Income Tax Department follows "Rounding off in calculation Tax payable. 3) Definition of "Rounding off is supported by Mathematics Dictionary. 4) Judgements relied. a) Microfirm Capital (P) Ltd. vs. Dy.CIT (2018) 168 ITD 301/89 taxmann.com 23 (Kolkata-Trib) b) Rahul Constructions vs. Dy.CIT (2010) 38 DTR (Pune) (Trib) 19

5.

The ld.counsel for the assessee at the very outset submitted that fair market value of the premium charged by the assessee be taken as per valuation report i.e. Rs.859.56 per share. The limited contention was that this value be adopted at Rs.860/- per share, because the concept of rounding demonstrated that such estimated opinion be taken to nearest figure. If 0.44 is being added in the value worked out on the basis of valuation, then this value be taken at Rs.860/- per share. On the other

ITA No.2555/Ahd/2017 - 3 -

hand, the ld.DR relied upon the order of the AO. The finding of the ld.AO on this issue reads as under: “During the year under consideration, the assessee allotted 6000 shares of face value of Rs.10/- per share with share premium of Rs.890/-. The assessee submitted before the A.O., a Valuation Report of the shares according to which fair market value was assessed at Rs.859.56. After invoking the provisions of section 56(2)(viib), the A.O assessed a sum of Rs. 2,42,640/- ( Rs. 40.44 x 6000) being the amount of snare premium more than the fair market value, as income from other sources.”

6.

A perusal of the above would indicate that the AO made the addition of Rs.2,42,640/- by multiplying 6000 shares with Rs.40.44. This valuation for determining this FMV on premium at Rs.859.56 is based on the basis of Chartered Accountant’s report obtained by the assessee itself. The limited prayer made by the assessee at time of hearing is that this figure should be adopted as a round figure i.e. Rs.860/-. It hardly makes any difference because Rs.0.44 multiplied by 6000 comes to 2640 only. If this amount is reduced from Rs.2,42,640/-, it does not make much difference. Therefore, considering this smallness of the amount, we do not wish to change working made by the AO on account of adopting the figure by round off concept. We do not see any merit in this appeal of the assessee. It is dismissed.

7.

In the result, appeal of the assessee is dismissed. Pronounced in the Open Court on 19th March, 2019.

Sd/- Sd/- (WASEEM AHMED) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER

Ahmedabad; Dated, 19/03/2019

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