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“valuation of shares”

Special Rate ProvisionsRule 11UARule 11UA508 judgments

The decision most relied on for valuation of shares is PCIT v. Chain House International (P) Ltd. (98 Taxmann.com 47), cited in 104 judgments on BharatTax.

Leading authorities on valuation of shares

PCIT v. Chain House International (P) Ltd.
98 Taxmann.com 47 · 2018 · High Court
104
citing judgments

The Assessing Officer cannot arbitrarily reject a share valuation report prepared by an expert using recognized methods like NAV or DCF for the purpose of Section 56(2)(viib) without providing valid reasons to demonstrate its perversity or unreasonableness.

CIT v. George Henderson & Co. Ltd.
66 ITR 622 · 1967 · Supreme Court
82
citing judgments

The 'full value of consideration' for computing capital gains under Section 48 of the Income Tax Act, 1961 (or its predecessor, Section 12B of the 1922 Act), means the actual price bargained for and received or accrued by the parties. It does not refer to the market value or any notional value of the asset transferred.

Vodafone M-Pesa Ltd. v. PCIT
164 DTR 257 · 2018 · High Court
69
citing judgments

An assessee has the option to choose either the Discounted Cash Flow (DCF) method or the Net Asset Value (NAV) method for share valuation under Section 56(2)(viib) read with Rule 11UA. The Assessing Officer cannot substitute the chosen method or value without identifying a specific error in the assessee's valuation.

CIT v. Green Infra Ltd.
78 Taxmann.com 340 · 2017 · High Court
56
citing judgments

The valuation of shares is not relevant for determining the genuineness of a transaction under Section 68 of the Income Tax Act. Interest income earned on the deposit of surplus funds is taxable as business income.

CIT v. Bank of Baroda
262 ITR 334 · 2003 · High Court
51
citing judgments

An assessee is entitled to claim a deduction for the depreciation in the value of investments, such as shares and securities, if these investments are valued at cost or market value, whichever is lower, consistent with the real income principle.

PCIT v. Cinestaan Entertainment Pvt Ltd.
433 ITR 82 · 2021 · High Court
49
citing judgments

The Assessing Officer cannot reject the share valuation method adopted by an assessee under Section 56(2)(viib) if it adheres to prescribed methodologies and commercial prudence. The valuation cannot be challenged based on future performance or by substituting another method.

Jeevan Investment & Finance (P.) Ltd. v. CIT
88 Taxmann.com 552 · 2017 · High Court
37
citing judgments

An Assessing Officer's failure to conduct necessary inquiries renders the assessment order erroneous and prejudicial to the revenue, justifying revision under Section 263.

Innoviti Payment Solutions Pvt. Ltd. v. ITO
102 Taxmann.com 59 · 2019 · ITAT
35
citing judgments

The Assessing Officer (AO) cannot discard the Discounted Cash Flow (DCF) method for share valuation if the assessee opts for it as per Rule 11UA(2). The AO must record reasons for not accepting the assessee's valuation report and obtain a fresh report before proceeding with their own valuation, but cannot change the method chosen by the assessee.

Judgments citing valuation of shares

M/S Monk Akarshala Private Limited, Mumbai vs. Dy Commissioner of Income Tax, Circle-2(2)(1), Mumbai

ITA 4151/MUM/2023[2012-13]Status: DisposedITAT Mumbai03 May 2024AY 2012-13

Bench: Shri Narendra Kumar Billaiya, Hon'Ble & Shri Sunil Kumar Singh, Hon'Blem/S. Monk Akarshala Private Limited V. Dcit – Circle – 2(2)(1) 4116 Oberoi Garden Estate Room No. 545 Chandivli Vlg Farm Road Aayakar Bhavan, M.K. Road Near Chandivli Studio, Saki Naka Mumbai - 400020 Mumbai City - 400072 Pan: Aagcm4703K (Appellant) (Respondent) Assessee Represented By : Shri Ajay Wadhwa & Ms. Manasi Vyas Department Represented By : Smt Mahita Nair

Section 234B

along with basis for working out premium. Also, documentary evidences to be filed in support of your submissions in this regard. Justify the valuation of share premium in view of the huge losses incurred by the company. (vi) Date and details of allotment of shares of new investors. Also state ... assessee did not find any favour with the Assessing Officer who was of the opinion that the assessee has not furnished valuation of shares done by it before arriving at the share premium value. The Assessing Officer further observed that all the share applicants do not have sufficient funds

Pingash Marketing Private Limited, Ballabhgarh vs. ITO Ward-2(1), Faridabad

In the result, Appeals in ITA No

ITA 99/DEL/2021[2016-17]Status: DisposedITAT Delhi18 Apr 2024AY 2016-17

Bench: Dr. B.R.R. Kumar & Shri Yogesh Kumar U.S.Ita No.84/Del/2021, A.Y.2016-17)

Section 143(1)Section 251(1)Section 271(1)(c)Section 52(2)Section 56(2)(viib)Section 68

fair market value of the share is required to be determined either by the Merchant Banker or by the Chartered Accountant. The valuation of shares based on DCF is basically to see the future year's revenue and profits projected and then discount the same to arrive at the present ... accepted the DCF methoc adopted by the assessee and he analyzed the factual performance of the assessee subsequent to issue o: shares. The valuation of shares are for that matter any valuation is itself is a projection of future events oi activities and no doubt it has to be done

Gopesh Fabrics Pvt. Ltd., Ballabhgarh vs. ITO Ward-1(3), Faridabad

In the result, Appeals in ITA No

ITA 98/DEL/2021[2016-17]Status: DisposedITAT Delhi18 Apr 2024AY 2016-17

Bench: Dr. B.R.R. Kumar & Shri Yogesh Kumar U.S.Ita No.84/Del/2021, A.Y.2016-17)

Section 143(1)Section 251(1)Section 271(1)(c)Section 52(2)Section 56(2)(viib)Section 68

fair market value of the share is required to be determined either by the Merchant Banker or by the Chartered Accountant. The valuation of shares based on DCF is basically to see the future year's revenue and profits projected and then discount the same to arrive at the present ... accepted the DCF methoc adopted by the assessee and he analyzed the factual performance of the assessee subsequent to issue o: shares. The valuation of shares are for that matter any valuation is itself is a projection of future events oi activities and no doubt it has to be done

Vidhi Cinemas Pvt.Ltd., Haryana vs. ITO Ward-2(5), Faridabad

In the result, Appeals in ITA No

ITA 88/DEL/2021[2016-17]Status: DisposedITAT Delhi18 Apr 2024AY 2016-17

Bench: Dr. B.R.R. Kumar & Shri Yogesh Kumar U.S.Ita No.84/Del/2021, A.Y.2016-17)

Section 143(1)Section 251(1)Section 271(1)(c)Section 52(2)Section 56(2)(viib)Section 68

fair market value of the share is required to be determined either by the Merchant Banker or by the Chartered Accountant. The valuation of shares based on DCF is basically to see the future year's revenue and profits projected and then discount the same to arrive at the present ... accepted the DCF methoc adopted by the assessee and he analyzed the factual performance of the assessee subsequent to issue o: shares. The valuation of shares are for that matter any valuation is itself is a projection of future events oi activities and no doubt it has to be done

Zhilmil Electronics Pvt. Ltd., Haryana vs. ITO Ward-2(5), Faridabad

In the result, Appeals in ITA No

ITA 87/DEL/2021[2016-17]Status: DisposedITAT Delhi18 Apr 2024AY 2016-17

Bench: Dr. B.R.R. Kumar & Shri Yogesh Kumar U.S.Ita No.84/Del/2021, A.Y.2016-17)

Section 143(1)Section 251(1)Section 271(1)(c)Section 52(2)Section 56(2)(viib)Section 68

fair market value of the share is required to be determined either by the Merchant Banker or by the Chartered Accountant. The valuation of shares based on DCF is basically to see the future year's revenue and profits projected and then discount the same to arrive at the present ... accepted the DCF methoc adopted by the assessee and he analyzed the factual performance of the assessee subsequent to issue o: shares. The valuation of shares are for that matter any valuation is itself is a projection of future events oi activities and no doubt it has to be done

Shanta Blankets Pvt. Ltd., Haryana vs. ITO Ward-2(3), Faridabad

In the result, Appeals in ITA No

ITA 84/DEL/2021[2016-17]Status: DisposedITAT Delhi18 Apr 2024AY 2016-17

Bench: Dr. B.R.R. Kumar & Shri Yogesh Kumar U.S.Ita No.84/Del/2021, A.Y.2016-17)

Section 143(1)Section 251(1)Section 271(1)(c)Section 52(2)Section 56(2)(viib)Section 68

fair market value of the share is required to be determined either by the Merchant Banker or by the Chartered Accountant. The valuation of shares based on DCF is basically to see the future year's revenue and profits projected and then discount the same to arrive at the present ... accepted the DCF methoc adopted by the assessee and he analyzed the factual performance of the assessee subsequent to issue o: shares. The valuation of shares are for that matter any valuation is itself is a projection of future events oi activities and no doubt it has to be done

Sakshi Fincap Pvt. Ltd., New Delhi vs. ITO Ward-22(2), New Delhi

In the result, the appeal of the assessee is allowed

ITA 8389/DEL/2019[2015-16]Status: DisposedITAT Delhi16 Apr 2024AY 2015-16

Bench: Sh. C. N. Prasaddr. B. R. R. Kumar

For Appellant: Sh. Aman Garg, AdvFor Respondent: Sh. Vivek Vardan, Sr. DR
Section 254Section 56(2)(viib)

facts and in law in confirming the addition of Rs. 50,77,334/- made by the AO on account of difference in valuation of shares invoking the provision of section 56(2)(viib) of the Act read with rule 110 & 11 UA of the Income Tax Rule, 1962. (ii) That

Asst. Commissioner of Income Tax, Mumbai vs. Aadhaar Wholesale Trading and Distribution Ltd., Mumbai

ITA 2653/MUM/2023[2011-12]Status: DisposedITAT Mumbai05 Apr 2024AY 2011-12

Bench: Shri Amit Shukla & Shri, S Rifaur Rahman

For Appellant: Respondent byFor Respondent: Shri. Madhur Agrawal
Section 143(1)Section 143(3)Section 147Section 56(2)(viib)Section 68

report nor has made any independent valuation of the shares of the appellant company. 13. 14. The Ld. AR also argued that the valuation of shares is a commercial decision between investors and investees and once both the parties agree on a price of subject shares, then questioning

Asst. Commissioner of Income Tax, Mumbai vs. Aadhaar Wholesale Trading and Distribution Ltd., Mumbai

ITA 2651/MUM/2023[2013-14]Status: DisposedITAT Mumbai05 Apr 2024AY 2013-14

Bench: Shri Amit Shukla & Shri, S Rifaur Rahman

For Appellant: Shri. Madhur AgrawalFor Respondent: Shri. Ajay Chandra &
Section 143(1)Section 143(3)Section 147Section 56(2)(viib)Section 68

report nor has made any independent valuation of the shares of the appellant company. 13. 14. The Ld. AR also argued that the valuation of shares is a commercial decision between investors and investees and once both the parties agree on a price of subject shares, then questioning

Asst. Commissioner of Income Tax, Mumbai vs. Aadhaar Wholesale Trading and Distribution Ltd., Mumbai

ITA 2650/MUM/2023[2014]Status: DisposedITAT Mumbai05 Apr 2024

Bench: Shri Amit Shukla & Shri, S Rifaur Rahman

For Appellant: Shri. Madhur AgrawalFor Respondent: Shri. Ajay Chandra &
Section 143(1)Section 143(3)Section 147Section 56(2)(viib)Section 68

report nor has made any independent valuation of the shares of the appellant company. 13. 14. The Ld. AR also argued that the valuation of shares is a commercial decision between investors and investees and once both the parties agree on a price of subject shares, then questioning

Asst. Commissioner of Income Tax, Mumbai vs. Aadhaar Wholesale Trading and Distribution Ltd., Mumbai

ITA 2646/MUM/2023[2017-18]Status: DisposedITAT Mumbai05 Apr 2024AY 2017-18

Bench: Shri Amit Shukla & Shri, S Rifaur Rahman

For Appellant: Shri. Madhur AgrawalFor Respondent: Shri. Ajay Chandra &
Section 143(1)Section 143(3)Section 147Section 56(2)(viib)Section 68

report nor has made any independent valuation of the shares of the appellant company. 13. 14. The Ld. AR also argued that the valuation of shares is a commercial decision between investors and investees and once both the parties agree on a price of subject shares, then questioning

ACIT, Mumbai vs. Aadhaar Wholesale Trading and Distribution Ltd., Mumbai

ITA 2635/MUM/2023[2012-13]Status: DisposedITAT Mumbai05 Apr 2024AY 2012-13

Bench: Shri Amit Shukla & Shri, S Rifaur Rahman

For Appellant: Shri. Madhur AgrawalFor Respondent: Shri. Ajay Chandra &
Section 143(1)Section 143(3)Section 147Section 56(2)(viib)Section 68

report nor has made any independent valuation of the shares of the appellant company. 13. 14. The Ld. AR also argued that the valuation of shares is a commercial decision between investors and investees and once both the parties agree on a price of subject shares, then questioning

Tex- Kare Cleaners Pvt. Ltd., Mumbai vs. ITO 8 (3)(1), Mumbai

In the result, appeal of the assessee is allowed for statistical purposes

ITA 6924/MUM/2018[2013-14]Status: DisposedITAT Mumbai03 Apr 2024AY 2013-14

Bench: Shri Prashant Maharishi, Am & Shri Rahul Chaudhary, Jm Tex-Kare Cleaners Pvt. Ltd. Ito 8(3)(1) 99/103, Kazi Sayeed Street, Aaykar Bhavan, M.K. Road, Vs. Masjid Bunder, Mumbai-400 020 Mumbai-400 003 (Appellant) (Respondent) Pan No. Aadct1696D

For Appellant: Adv. Ritika Agarwal &For Respondent: Shri P.D. Chougule, DR
Section 143(2)Section 143(3)Section 53Section 56

valuation by the assessee didnot consider share application money as liability. Therefore, one more opportunity was provided to the assessee to explain the valuation of shares. Assessee was also required to prove the creditworthiness of the subscribers. The assessee furnished the front page of the return of income ... business and increased profitability. However, as there are no business related assets and liabilities in the assessee company till issue of above shares, valuation of shares was made on future net asset value based on allotment of shares. The additional shares thatwere allotted are only to existing shareholders, directors

M/S. Finwizard Technology Pvt Ltd., Bangalore vs. Assistant Commissioner of Income Tax, Circle- 1(2)(1), Bangalore

In the result, the appeal is allowed for statistical purpose

ITA 15/BANG/2024[2016-17]Status: DisposedITAT Bangalore28 Mar 2024AY 2016-17

Bench: Smt. Beena Pillai & Sri Laxmi Prasad Sahuassessment Year: 2016-17

For Appellant: Smt. Sheetal, A.RFor Respondent: Shri V. Parithivel, D.R
Section 133(6)Section 142(1)Section 143(2)Section 250Section 56(2)(viib)Section 68

same. The ld. AO therefore, observed that the discrepancies, if any in the DCF method adopted by the assessee to compute the valuation of shares, were not verifiable. In view of the same, the ld. AO made addition u/s 56(2)(viib) of the Act amounting to Rs.1

Holiday Triangle Travel Private Limited, Gurgaon vs. Income Tax Officer, Jaipur

The appeal is dismissed as infructuous

ITA 238/DEL/2024[2014-15]Status: HeardITAT Delhi26 Mar 2024AY 2014-15

Bench: Shri Shamim Yahyaholiday Triangle Travel Private Ltd., Vs. Income Tax Officer, Plot No.52, 3Rd Floor, Jaipur. Batra House, Sector 32, Gurgaon – 122 001 (Haryana). (Pan : Aacch7688E) (Appellant) (Respondent) Assessee By : Shri Abhishek Dhawan, Ca Revenue By : Shri Om Prakash, Sr. Dr Date Of Hearing : 26.03.2024 Date Of Order : 26.03.2024

For Appellant: Shri Abhishek Dhawan, CAFor Respondent: Shri Om Prakash, Sr. DR
Section 250Section 56(2)(viib)

commercial transactions. 4.2 That no powers have been vested to the office of Ld. AO under the Act to change the method of valuation of shares opted by the Appellant. 4.3 The Ld. CIT(A) has grossly erred in accepting the fair value of the shares computed

Jt. CIT (OSD) - 2 (3)(1), Mumbai vs. Tata Sons Private Ltd., Mumbai

In the result, appeal of the Revenue is dismissed

ITA 1349/MUM/2019[2012-13]Status: DisposedITAT Mumbai15 Mar 2024AY 2012-13

Bench: Shri Vikas Awasthy& Shri S.Rifaur Rahmanआअसं. 1093/मुं/2019 (नि.व. 2012-13)

referred to the valuation report at page 4 to 54 of the paper book. The Ld.Counsel for the assessee pointed that for valuation of shares the valuer has adopted multiple methods and has assigned weightage to each of the method for valuation analysis. She further submitted that Comparable Company Multiple ... this method. The valuer has also applied Discounted Cash Flow(DCF) method and has assigned 50% weightage to the same. Thus, the valuation of shares is based on scientific basis. The Id.Counsel for the assessee further asserted that the valuation is in accordance with Master Circular No.11/2011-12 dated 01/07/2011 issued

Tata Sons Pvt. Ltd, Mumbai vs. CIT (A)-58, Mumbai

In the result, appeal of the Revenue is dismissed

ITA 1093/MUM/2019[2012-13]Status: DisposedITAT Mumbai15 Mar 2024AY 2012-13

Bench: Shri Vikas Awasthy& Shri S.Rifaur Rahmanआअसं.1093/मुं/2019(िन.व. 2012-13) Tata Sons Private Limited, Bombay House, 24, Homi Mody Street, Fort, Mumbai 400 001. ...... अपीलाथ"/Appellant Pan: Aaact-4060-A बनाम Vs. The Commissioner Of Income Tax (Appeals)-58, Jcit, Room No.552, Aaykar Bhavan, M.K.Road, ....."ितवादी/Respondent Mumbai – 400 020 आअसं.1349/मुं/2019 (िन.व. 2012-13) Jt.Cit (Osd)-2(3)(1), Mumbai Room No.552, 5Th Floor, Aaykar Bhavan, M.K.Road, ...... अपीलाथ"/Appellant Mumbai – 400 020 बनाम Vs. Tata Sons Private Limited, Bombay House, 24, Homi Mody Stree, Fort, Mumbai 400 001. ....."ितवादी/Respondent Pan: Aaact-4060-A अपीलाथ""ारा/Appellant By : Ms. Arati Vissanji & Ms. Aastha Shah, Advocates. "ितवादी "ारा/Respondent By : S/Shri Manoj Kumar, Cit-Dr & Ujjwal Kumar Chavhan, Sr.Ar सुनवाई की ितिथ/ Date Of Hearing : 22/12/2023 घोषणा की ितिथ/ Date Of Pronouncement : 15/03/2024

For Appellant: Ms. Arati Vissanji and Ms. Aastha Shah, AdvocatesFor Respondent: S/Shri Manoj Kumar, CIT-DR and Ujjwal Kumar Chavhan, Sr.AR

valuation report at page 4 to 54 of the paper book. The Ld.Counsel for the assessee 3 ITA NO.1349/MUM/2019(A.Y.2012-13) pointed that for valuation of shares the valuer has adopted multiple methods and has assigned weightage to each of the method for valuation analysis. She further submitted that Comparable Company ... this method. The valuer has also applied Discounted Cash Flow(DCF) method and has assigned 50% weightage to the same. Thus, the valuation of shares is based on scientific basis. The ld.Counsel for the assessee further asserted that the valuation is in accordance with Master Circular No.11/2011-12 dated 01/07/2011 issued

ACIT Circle-1(3)(1) Int. Taxation, New Delhi vs. Anand Swarup Gupta, New Delhi

ITA 2371/DEL/2022[2018-19]Status: DisposedITAT Delhi14 Mar 2024AY 2018-19

Bench: Dr. Brr Kumar & Ms. Astha Chandraasstt. Year: 2018-19 Acit Circle-1(3)(1), Vs. Sh. Anand Swarup Gupta, (Intl. Tax), Ibc M-38/1 Middle Circle, Room No. 501, Connaught Place, D-Block,Civic Centre, New Delhi – 110 001 New Delhi 110 002 Pan Aappg3467Q (Appellant) (Respondent)

For Appellant: NoneFor Respondent: Shri Sanjay Kumar, Sr. DR
Section 142(1)Section 143(2)Section 143(3)Section 144C(3)Section 68

Rule 11UA of the Income Tax Rules in order to arrive at FMV of Rs. 6,07,200/- per share of UMS the valuation of shares at FMV of UMS and KMS was done in accordance with the Income Tax Rules. 8.1 The AO held that buy back

Sansar Trading (P) Ltd., Kolkata vs. ITO, Ward-5(2), Kol, Kolkata

In the result, appeal of the assessee is allowed for statistical purposes

ITA 544/KOL/2023[2012-13]Status: HeardITAT Kolkata08 Mar 2024AY 2012-13

Bench: Shri Sanjay Garg & Shri Girish Agrawalassessment Year: 2012-13

For Appellant: Shri A. N. Kesari, FCAFor Respondent: Shri Bonnine Debarma, JCIT
Section 131Section 142(1)Section 143(3)Section 14ASection 56(2)(viib)Section 68

erred in law in asking and in directing Ld. A.O. for valuation report of the appellant company for the purpose of valuation of Share Premium of Rs.90/- charged by your appellant company on issue of new share capital at Rs.10/- per share. Because provision of Section 56(2)(viib ... relevant to determination of fair market value of share. Prior to above Section there has been no precedent for determination and valuation of Share Premium to be charged by the company issuing fresh share capital.” 3. Brief facts of the case are that assessee filed its return of income

Shivi Holdings Pvt. Ltd, New Delhi vs. ACIT Circle-23(1), New Delhi

In the result, the appeal of the assessee is allowed

ITA 2402/DEL/2019[2015-16]Status: DisposedITAT Delhi05 Mar 2024AY 2015-16

Bench: Shri Saktijit Dey & Shri M. Balaganeshshivi Holdings Pvt. Ltd, Vs. Acit, G-16, Marina Acade, Circle-23(1), Connaught Circus, New New Delhi Delhi (Appellant) (Respondent) Pan: Aaaco2664H

For Appellant: Dr. Rakesh Gupta, AdvFor Respondent: Shri Asish Chandra Mohanty, CIT DR
Section 115JSection 143(3)

traded frequently on the recognized stock exchange. The assessees vide his submission dated 26.12.2017 submitted here as under: "In regard to valuation of shares and determination of sale consideration at Rs. 335 per shares, we have already explained quite in detail that transaction between the companies