BRAJBHUMI NIRMAAN PRIVATE LIMITED,SALT LAKE vs. ITO, WARD 2(1),, KOLKATA

ITA 2605/KOL/2025Status: DisposedITAT Kolkata10 February 2026AY 2015-201614 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition made by the AO under Section 56(2)(viib) was unjustified and directed its deletion. The Tribunal found that the AO could not have substituted the DCF method adopted by the assessee. The DCF valuation was based on valid assumptions and reasonable parameters, resulting in an FMV of Rs. 189.40 per share. The Tribunal noted that the assessee's business was real estate development, and it had acquired land, obtained project sanction, and secured a construction loan. The Tribunal observed that the assessee followed the completed contract method, explaining why revenues and costs were not recognized in the financials during the period under review. Furthermore, the Tribunal found that even if the NAV method was applied, valuing the land parcels at their prevailing circle rates (Rs. 126.87 crores) for FY 2014-15 would result in an NAV per share of Rs. 310, which is higher than the issue price of Rs. 189.40 per share. The lower authorities had erred by arbitrarily using the book value of land (Rs. 33.66 crores) instead of its market value. The Tribunal concluded that the share premium charged was not excessive.

What were the facts?

The assessee, Brajbhumi Nirmaan Private Limited, filed its return of income for AY 2015-16 showing a loss. The case was selected for scrutiny due to large share premium. The assessee had issued 10,00,000 shares at a premium of Rs. 179.40 per share, raising Rs. 18,94,00,000. The AO rejected the assessee's Discounted Cash Flow (DCF) valuation report, citing unsupported projections and caveats. Instead, the AO adopted the Net Asset Value (NAV) of Rs. 87.30 per share as the Fair Market Value (FMV) and added the excess premium of Rs. 10,21,00,000 under Section 56(2)(viib). The CIT(A) confirmed this addition, finding that subsequent financial results did not support the DCF projections. The assessee contended that its business was real estate development, it had acquired land parcels, obtained project sanction, and secured a construction loan. The assessee also argued that if NAV was considered, valuing land at prevailing circle rates (Rs. 126.87 crores) would result in an FMV of Rs. 310 per share, higher than the issue price.

What were the issues?

1. Whether the addition of Rs. 10,21,00,000/- made by the AO under Section 56(2)(viib) of the Income-tax Act, 1961, on account of excess share premium received, is justified, and if the CIT(A) erred in confirming the same? Assessee's contentions: - The assessee relied on a DCF valuation report obtained in terms of Rule 11UA, which determined the FMV of shares at Rs. 189.40 per share, justifying the premium charged. - The DCF projections were based on valid assumptions, including construction costs, industry average per square feet cost, and a Weighted Average Cost of Capital (WACC) of 20.94%, which was not excessive. - The assessee followed the completed contract method, hence revenue and costs were postponed until project completion. Construction WIP and advances from customers were reported. - Even if the NAV method was applied, valuing immovable property at prevailing circle rates (Rs. 126.87 crores) would result in an NAV per share of Rs. 310, which is higher than the issue price. - The lower authorities erred in rejecting the DCF valuation and the NAV calculation by arbitrarily using book value of land instead of market value. Revenue's contentions: - The AO rejected the DCF valuation report as projections and assumptions were not supported by valid documentary evidence and the valuer's report had caveats. - Subsequent financial results did not support the DCF projections, indicating no construction activity or sales. - The valuation report was based on inputs from the assessee, not market research, making it unreliable. - The assessee failed to provide evidence of ownership, construction, or sale of property. - The AO doubted the veracity of the report without external market research.

Which sections of the Income-tax Act were involved?

Section 56(2)(viib),Section 143(2),Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM

For Appellant: Shri Akkal Dudhwewala, AR
For Respondent: Shri Madanappa Raghuveer, DR
Hearing: 19.01.2026Pronounced: 10.02.2026

Per Rajesh Kumar, AM:

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 15.10.2025 for the AY 2015-16. 2. The only issue raised in the various grounds of appeal is against the confirmation of addition of Rs.10,21,00,000/- by the Id. CIT (A) as made by the Id. AO u/s 56(2)(viib) of the Act in respect of excess share premium received over the fair market value of shares issued during

the year.

Brajbhumi Nirmaan Private Limited; A.Y. 2015-16 The facts in brief are that, t

The order continues below.

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