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Income Tax Appellate Tribunal, “B’’BENCH: BANGALORE
Before: SHRI N.V. VASUDEVANAND SHRI B.R. BASKARAN, ACCOUTANT MEMBER
PER B.R. BASKARAN, ACCOUNTANT MEMBER:
The assessee has filed this appeal challenging the order dated 18.3.2019 passed by Ld. CIT(A)-4, Bengaluru and it relates to assessment year 2016-17. The assessee is aggrieved by the decision of Ld. CIT(A) in confirming the addition of Rs.4.93 crores relating to share premium collected by the assessee made by the AO u/s 56(2)(viib) of the Act.
2. We heard the parties and perused the record. The facts relating to the issue are stated in brief. The assessee company is engaged in the business of trading in gold bullions. The A.O.
M/s. Mehta Gold Palace Ltd., Bangalore Page 2 of 5 noticed that the assessee has received share premium of Rs.5.86 crores during the year under consideration from following two parties: (a) M/s. Divyam Enterprises Pvt. Ltd.
(b) M/s. Hussain Murad Fashion LLC.
The assessee has allotted 18,720 shares to M/s. Hussain Murad Fashion LLC at a premium of Rs.490/- per share and collected a premium of Rs.91,72,800/-. Since M/s Hussain Murad Fashion LLC is a non-resident, the AO did not apply provisions of section 56(2)(viib) of the Act.
The assessee has also issued 50000 shares of Rs.10/- each to M/s. Divyam Enterprises Pvt. Ltd. at a premium of Rs.990/- per share and accordingly, collected share premium of Rs.4.95 crores. Hence, the A.O. examined the share premium collected by the assessee from M/s. Divyam Enterprises Pvt. Ltd in terms of section 56(2)(viiib) of the Act. The assessee furnished a valuation report dated 22.7.2015 obtained from a Chartered Accountant named Shri Roshan T. Mansoor in support of the valuation of shares at Rs.1,000/- per share. The A.O. noticed that the valuer Shri Roshan T. Mansoor has given tax audit report also to the assessee u/s 44AB of the Act and as per rule 11U(a) of the I.T. Rules, the valuation report should not have been obtained from him. Accordingly, the A.O. rejected the valuation report given by Shri Roshan Mansoor. Then the A.O. proceeded to compute the value of shares of the assessee as per 11UA(2)(a) of the I.T. Rules and determined the valuation of shares at Rs.12.58 per share. Accordingly, the A.O. assessed the excess premium of Rs.4,93,71,000/- as income of the assessee u/s 50(2)(viib) of the Act.
M/s. Mehta Gold Palace Ltd., Bangalore Page 3 of 5
4. In the appellate proceedings, Ld. CIT(A) confirmed the addition by following the decision rendered by the coordinate bench in the cases of Innoviti Payment Solutions Pvt. Ltd. (ITA No.1278/Bang/2018) and M/s. TUV Rheinland NIFE Academy Pvt. Ltd. Vs. ITO Ward 7(1)(2), Bengaluru (ITA No.3160/Bang/2018). Aggrieved, the assessee has filed this appeal before us.
5. The Ld. A.R. submitted that the assessee initially furnished the valuation report obtained from Shri Roshan T Mansoor in ignorance of provisions of section 11U of the I.T. Rules. However, during the course of assessment proceedings, the assessee has obtained another valuation report from a Chartered Accountant named Shri Prasanna Adiga and the same was furnished before the A.O. However, neither the A.O. nor the CIT(A) considered the fresh valuation report furnished by the assessee. The Ld. A.R. further submitted that the Ld. CIT(A) has placed reliance on the decision rendered by coordinate benches in the cases referred above. However, another coordinate bench of ITAT has rendered a decision in the case of M/s. Futura Business Solutions Pvt. Ltd. Vs. ITO (ITA No.3404/Bang/2018), wherein the Tribunal has followed the decision rendered by Hon’ble Bombay High Court in the case of Vodafone Mpaisa Ltd. 164 DTR 257 and held that DCF method of valuation is also recognised method of valuation under rule 11UA.
6. We notice that the valuation report dated 22.7.2015 obtained from a Chartered Accountant named Shri Prasanna Adiga has not been considered by the A.O. We also notice that the accountant has followed DCF method of valuation for determining the value of equity shares of the assessee company. Since the A.O. has not examined the issue by considering the valuation report referred above, we feel it proper to restore this issue to the file of the A.O. for M/s. Mehta Gold Palace Ltd., Bangalore Page 4 of 5 examining the valuation of equity shares in terms of section 56(2)(viib) of the Act by duly considering the valuation report of the assessee and also taking into account the decision rendered by coordinate bench in the case of Futura Business Sales Pvt. Ltd. (supra). Accordingly, we set aside the order passed by Ld. CIT(A) and restore this issue to the file of the A.O. After affording adequate opportunity to the assessee, the A.O. may take appropriate decision in accordance with law.
In the result, the appeal filed by the assessee is treated as allowed for statistical purposes. Order pronounced in the open court on 14-8-2020.
Sd/- Sd/- (N.V. Vasudevan) (B.R. Baskaran) Vice President Accountant Member Bangalore, Dated 14th Aug, 2020. VG/SPS Copy to:
1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order
Asst. Registrar, ITAT, Bangalore.
M/s. Mehta Gold Palace Ltd., Bangalore Page 5 of 5
Date of Dictation ………………………………………
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