No AI summary yet for this case.
Income Tax Appellate Tribunal, ‘C’ (SMC
Before: SHRI INTURI RAMA RAO & SHRI DUVVURU RL REDDY]
आदेश / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER
This is an appeal filed by the Assessee directed against the Order of the Commissioner of Income Tax (Appeals)-3, Chennai (‘CIT(A)’ for short) dated 28.03.2019 for the Assessment Year (AY) 2015-16.
ITA No.1426 /2019 :- 2 -:
The Assessee raised the following grounds of appeal:
‘’1. For that the order of the Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case to the extent prejudicial to the interest of the assessee and at any rate is opposed to the principles of equity, natural justice and fair play.
2. For that the Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs.29,62,5601- u/s.56(2)(viib).
For that the Commissioner of Income Tax (Appeals) failed to appreciate that the provisions of section 56(2)(viib) are not invocable in the facts and circumstances of the appellant’s case.
For that the Commissioner of Income Tax (Appeals) erred in concluding that fair market value of share is Rs.36.67 per share.
For that the Commissioner of Income Tax (Appeals) erred in rejecting the fair market value of the land adopted by appellant while determining the fair market value of the shares
For that the Commissioner of Income Tax (Appeals) erred in adopting the guideline value of the landin determining the fair market value of the shares
For that the Commissioner of Income Tax (Appeals) failed to appreciate that the guideline value of the land is different from the market value of the land.
For that the Commissioner of Income Tax (Appeals) failed to appreciate that valuation of land can only be done by an expert.
9. For that the appellant objects to the levy of interest u/s.234B’’.
The brief facts of the case are as under: 3.
The appellant namely M/s. RSJ Properties Prviate Limited, is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of construction of building and civil engineering. The return of income for the AY 2015-16 was filed on ITA No.1426 /2019 :- 3 -:
29.09.2015 admitting loss of Rs.2,94,106/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Corporate Ward 5(3) Chennai (hereinafter called “AO”) vide order dated 22.12.2017 passed u/s. 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) at total income of Rs.26,68,454/-. While doing so, the Assessing Officer made addition of Rs.29,62,560/- under section 56(2)(viib) of the Act.
The factual background of the addition is as under:- 4.
During the previous year relevant to assessment year under consideration, assessee received share capital of Rs.19,20,000/- with share premium of Rs.80,64,000/-. According to the assessee the fair market value of the shares issued is Rs.52.09 per share based on the valuation report given by Chartered Accountants namely KKS and Co, Chennai. While computing the FMV of the shares, assessee adopted market value of the land at Bikaner, Rajasthan, based on the valuation report of registered valuer. However, during the assessment proceedings, the Assessing Officer had adopted FMV of the shares at Rs.12.63 per share by adopting book value of the assets and made an addition of Rs.75,59,040/- u/s,56(2)(viib) of the Act.
However, pursuant to the petition filed u/s.144 of the Act, the Additional Commissioner of Income Tax issued direction to the ITA No.1426 /2019 :- 4 -:
Assessing Officer to adopt the value of the share determined in accordance with specified method Rule 11UA or the value of shares as substantiated by the assessee to the satisfaction of the Assessing Officer. Consequent to the direction of the Addl. CIT, the Assessing Officer computed FMV of the shares based on guideline of the land for registration purpose and adopted FMV at land at Rs.3,15,60,031/- as against value estimated by the registered value at Rs.4,89,86,700/-, computed FMV at Rs.36.67 per share and the difference in FMV of a share is Rs.15.43 per share i.e value as per assessee is Rs.51.10 per share and value as per Assessing Officer is Rs.36.67 per share for 1,92,000 shares, and Assessing Officer made an addition of Rs.29,62,560/- and brought to tax u/s.56(2)(viib) of the Act.
Being aggrieved, an appeal was preferred before the 5. ld.CIT(A) who vide impugned order confirmed the action of the Assessing Officer.
Being aggrieved, the appellant is in appeal before us in the 6. present appeal. The ld.Authorised Representative during the course of hearing submitted that guideline value prescribed for the purpose of stamp duty is not always the same as FMV. He also placed reliance on the decision of Hon’ble Jurisdictional High Court in the case of Hindustan Motors Ltd vs. Members, The Appropriate Authority & Ors,
ITA No.1426 /2019 :- 5 -:
249 ITR 424 and he further submitted that the FMV was computed by the assessee based on the CA Certificate who, in turn, relying on the valuers report, adopted the market value of the land at Bikaner, Rajasthan at Rs.4,89,86,700/-. Accordingly computed FMV of the shares at Rs.52.09 per share and therefore FMV computed by the registered valuer cannot be assailed.
On the other hand, the ld. Sr. Departmental Representative 7. placed reliance on the orders of lower authorities.
We heard the rival submissions and perused the material on 8. record. The only issue involved in the present appeal relates to addition u/s.56 (2)(viib) of the Act. The bone of contention between the assessee and the Assessing Officer is with regard to the adoption of the FMV of the shares. The provisions of Section 56(2) (viib) of the Act provides that excess of consideration over and above the FMV of the shares is taxable as income under the head ‘’income from other sources’’. Rule 11UA (c) prescribes method of computation of FMV of the shares. Apparently in the present case neither Assessing Officer adopted one of the prescribed method for valuation of FMV nor the assessee adopted the prescribed method under clause (c) of Rule 11UA. In the circumstances, we remand the matter back to the file of ITA No.1426 /2019 :- 6 -: the Assessing Officer to recompute the FMV in accordance with the prescribed methods under the provisions of said rule.
In the result, the appeal of the assessee is partly allowed for statistical purpose.
Order pronounced on 14th day of October, 2019, at Chennai.