The Principal Commissioner of Income Tax-1 vs. Boppudi Logistics Private Limited

TCA.No.117 of 2026 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 11.08.2026 CORAM : THE HONOURABLE MR. SUSHRUT ARVIND DHARMADHIKARI, CHIEF JUSTICE AND THE HONOURABLE MR.JUSTICE G.ARUL MURUGAN T.C.A.No.117 of 2026 The Principal Commissioner of Income Tax-1 Chennai-600 034. Appellant(s) Vs Boppudi Logistics Private Limited New No.5, Old No.3, Plaza House, Thirumurthi Street, T.Nagar, Chennai-600 017. Respondent(s) PRAYER: Appeal filed under Section 260A of the Income-tax Act, 1961 against the order of Income Tax Appellate Tribunal, Madras C Bench, Chennai, dated 16.04.2025 passed in ITA No.1934/Chny/2024. For Appellant(s): Mr.T.Ravi Kumar, Senior Standing Counsel ______________ Page 1 of 9 https://www.mhc.tn.gov.in/judis ( Uploaded on: 11/08/2026 08:08:54 pm ) TCA.No.117 of 2026 JUDGMENT (Delivered by the Hon'ble Chief Justice) This appeal by the Income Tax Department challenges the order passed by the Income Tax Appellate Tribunal, Madras "C" Bench, Chennai, in I.T.A. No.1934/Chny/2024, dated 16.4.2025. The dispute relates to Assessment Year 2011-12. 2. The Revenue raised the following three substantial questions of law for our consideration: (i) Whether the Tribunal was correct in accepting a valuation certificate issued by a Chartered Accountant rather than an independent valuer or merchant banker under Rule 11UA of the Income-tax Rules, 1962? (ii) Whether the Tribunal erred in relying on a valuation certificate produced for the first time before it without giving the Assessing Officer an opportunity to examine it under Rule 46A of the Income-tax Rules, 1962? (iii) Whether the Tribunal was justified in accepting the share valuation of Rs.101.93 per share when the Assessing Officer had fixed the fair market value at ______________ Page 2 of 9 https://www.mhc.tn.gov.in/judis ( Uploaded on: 11/08/2026 08:08:54 pm ) TCA.No.117 of 2026 Rs.240/- per share based on contemporaneous comparable transactions of the same preference shares? 3. The Revenue contends that the transaction between group companies attracted Section 56(2)(viia) of the Income-tax Act, 1961. According to the Revenue, since the seller company had acquired preference shares from a Non-Resident Indian (NRI) at Rs.240/- per share, selling those shares to the respondent at Rs.130/- per share amounted to a transfer below fair market value. Substantial Question of Law No.1 4.1. Before adverting to the merits of the first substantial question of law raised for our consideration, it is apposite to refer to Rule 11UA(1)(c)(c) of the Income-tax Rules, 1962, which reads as follows: “Rule 11UA(1) For the purposes of section 56 of the Act, the fair market value of a property, other than immovable property, shall be determined in the following manner, namely,— ______________ Page 3 of 9 https://www.mhc.tn.gov.in/judis ( Uploaded on: 11/08/2026 08:08:54 pm ) TCA.No.117 of 2026 ... (c) valuation of shares and securities,- ... (c) The fair market value of unquoted shares and securities other than equity shares in a company which are not listed in any recognized stock exchange shall be estimated to be price it would fetch if sold in the open market on the valuation date and the assessee may obtain a report from a merchant banker or an accountant in respect of such valuation." [emphasis supplied] 4.2. The aforesaid Rule explicitly allows a valuation report from an accountant. When the statutory rule itself accepts an accountant's report, the Department cannot insist that only an independent valuer or a merchant banker report is valid. 4.3. The first question of law raised by the Revenue runs directly against the plain text of Rule 11UA(1)(c)(c) of the Rules. It holds no merit and does not require further consideration. ______________ Page 4 of 9 https://www.mhc.tn.gov.in/judis ( Uploaded on: 11/08/2026 08:08:54 pm ) TCA.No.117 of 2026 Substantial Question of Law No. 2 5.1. The Revenue argues that the valuation certificate was introduced by the assessee for the first time before the Tribunal. However, the record shows otherwise. Sub-paragraph (5) of the extract in paragraph 4 of the order passed by the Commissioner of Income Tax (Appeals) specifically records as under: "5. The appellant has furnished a valuation certificate based on audited books of account of Virgo Realtors Private Limited as of 31/3/2010 duly attested by its Managing Director, according to which the value per share is only Rs.101.93 (copy of certificate enclosed), whereas, the appellant has paid a consideration of Rs. 130/-. Hence, 56(viia) is not attracted in this case." [emphasis supplied] 5.2. The above extract confirms that the valuation certificate based on audited financial records duly attested by the Managing Director was submitted and considered during the first appellate ______________ Page 5 of 9 https://www.mhc.tn.gov.in/judis ( Uploaded on: 11/08/2026 08:08:54 pm ) TCA.No.117 of 2026 proceedings. The Revenue’s claim that the document was produced for the first time before the Tribunal is factually incorrect. 5.3. We are, therefore, of the view that the second question of law raised for our consideration is without any basis. Substantial Question of Law No.3 6.1. The Tribunal evaluated the factual matrix regarding the fair market value of the shares in detail. It noticed that the seller company held a total pool of 16,74,750 preference shares at the start of the year. Of these, only 5,00,250 shares were purchased from the NRI at Rs.240/- per share. The seller sold 11,03,500 shares to the respondent. A seller has the legal freedom to choose which block of shares to sell from its existing holdings. The Revenue cannot force an assumption that the shares sold were exclusively those purchased from the NRI. 6.2. The Tribunal further observed that Note 11 of the audited financial statements of the issuing company (Virgo Realtors Private ______________ Page 6 of 9 https://www.mhc.tn.gov.in/judis ( Uploaded on: 11/08/2026 08:08:54 pm ) TCA.No.117 of 2026 Limited) provided that shareholders could redeem preference shares between 1.6.2011 and 31.10.2011, at Rs.140/- per share. Paying Rs.130/- per share in March 2011 represented a realistic fair market value. 6.3. The Assessing Officer ignored the statutory valuation rules and substituted an arbitrary figure based on an isolated third- party transaction. The Tribunal correctly set aside this approach and confirmed that the price of Rs.130/- per share paid by the respondent was well within the statutory parameters. 6.4. In view of the categoric finding of the Tribunal, the third substantial question of law raised also does not merit consideration. 7. In our considered opinion, the order passed by the Tribunal is well-reasoned and does not warrant interference. No substantial question of law arises for consideration. 8. In the result, the Tax Case Appeal is dismissed and the order of the Income Tax Appellate Tribunal stands upheld. ______________ Page 7 of 9 https://www.mhc.tn.gov.in/judis ( Uploaded on: 11/08/2026 08:08:54 pm ) TCA.No.117 of 2026 There shall be no order as to costs. (SUSHRUT ARVIND DHARMADHIKARI, CJ) (G.ARUL MURUGAN,J)

11.08.2026 Index : Yes/No Neutral Citation : Yes/No sasi To: 1. The Assistant Registrar Income Tax Appellate Tribunal Chennai Benches, Chennai. 2. The Deputy Commissioner of Income-tax Corporate Circle 1(2), Chennai. 3. The Commissioner of Income-tax (Appeals) Income Tax Department National Faceless Appeal Centre, Delhi. ______________ Page 8 of 9 https://www.mhc.tn.gov.in/judis ( Uploaded on: 11/08/2026 08:08:54 pm ) TCA.No.117 of 2026 THE HON'BLE CHIEF JUSTICE AND G.ARUL MURUGAN,

J. (sasi) T.C.A.No.117 of 2026

11.08.2026 ______________ Page 9 of 9 https://www.mhc.tn.gov.in/judis ( Uploaded on: 11/08/2026 08:08:54 pm )