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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

Nahar Colours and Coatinhgs Private Limited, Udaipur vs. Principal Commissioner Ofincometax, Udaipur

In the result, appeal of the assessee is allowed

ITA 140/JODH/2023[2018-19]Status: DisposedITAT Jodhpur09 Aug 2023AY 2018-19
Section 142(1)Section 143(1)Section 143(2)Section 143(3)Section 263Section 801ASection 80I

enquiry. the query not otherwise satisfied while responding to another query. In the instant case, the Assessing is Officer raised query regarding valuation of shares in question to which response was only that the unquoted shares were valued at costs. No method of valuation of the shares was submitted

Jm Financial Ltd, Mumbai vs. DCIT 4(3), Mumbai

The appeal of the assessee is allowed and the appeal of the revenue is dismissed

ITA 3987/MUM/2015[2008-09]Status: DisposedITAT Mumbai04 Aug 2023AY 2008-09

Bench: Shri Aby T Varkey () & Ms. Padmavathy S. ()

Section 143(3)

case and in law, the Ld. CIT(A) further erred in not appreciating the fact that the assessee failed to establish the valuation of shares done on the basis of the net worth of the joint venture and that the consideration was for the worth of the shares ... therefore the consideration is for loss of business that cannot be treated as capital gains. From perusal of the method adopted for valuation of shares by the assessee, it is noticed that the assessee has agreed for a lump sum consideration without any breakup of what is attributable to assets

DCIT 4(3)(1), Mumbai vs. J.M. Financial Ltd, Mumbai

The appeal of the assessee is allowed and the appeal of the revenue is dismissed

ITA 3925/MUM/2015[2008-09]Status: DisposedITAT Mumbai04 Aug 2023AY 2008-09

Bench: Shri Aby T Varkey () & Ms. Padmavathy S. ()

Section 143(3)

case and in law, the Ld. CIT(A) further erred in not appreciating the fact that the assessee failed to establish the valuation of shares done on the basis of the net worth of the joint venture and that the consideration was for the worth of the shares ... therefore the consideration is for loss of business that cannot be treated as capital gains. From perusal of the method adopted for valuation of shares by the assessee, it is noticed that the assessee has agreed for a lump sum consideration without any breakup of what is attributable to assets

Citron Infraprojects Limited, Mumbai vs. Principle Commissioner of Income Tax, (Central)-4, Mumbai

ITA 1518/MUM/2023[2014-2015]Status: DisposedITAT Mumbai27 Jul 2023AY 2014-2015

Bench: Shri Kuldip Singh & Shri Gagan Goyalassessment Year: 2014-15

For Appellant: NoneFor Respondent: Mr. K.C. Selvamani, CIT D.R
Section 142(1)Section 144Section 153ASection 153DSection 263Section 56(2)(viib)

Principal Commissioner of Income Tax (Central)-4 erred in holding that the Ld. A.O. has failed to examine the correctness of valuation of shares and setting aside the appellant's case back to the Ld. A.O. for making a fresh assessment of such issue. The appellant prays that the said

Wns Global Services Private Limited, Mumbai vs. Assistant Comm. of Income Tax -14(1)(2), Mumbai

ITA 2451/MUM/2022[2017-18]Status: DisposedITAT Mumbai26 Jul 2023AY 2017-18

Bench: Vikas Awasthy () & Ms. Padmavathy S. ()

Section 143(1)Section 143(3)Section 14ASection 234CSection 43BSection 92C

2451/Mum/2022 WNS Global Services Pvt Ltd submitted the valuation report showing the calculation of value of shares as reproduced hereunder:- “7.2 Method for valuation of shares by the Assessee: 7.2.1 It is seen from form 3CEB as well as TPSR that during the year under consideration assessee has acquired ... assessee, without prejudice, as a matter of abundant caution, has disclosed the above international transaction by adopting (other method). For the purpose of valuation of shares, the assessee adopted the weighted average of two methods, namely, markets multiple method (MMM) and discounted cash flow method

Wns Global Services Private Limited, Mumbai vs. Assistant Comm. of Income Tax-14(1)(2), Mumbai

ITA 2450/MUM/2022[208-2019]Status: DisposedITAT Mumbai26 Jul 2023

Bench: Vikas Awasthy () & Ms. Padmavathy S. ()

Section 143(1)Section 143(3)Section 14ASection 234CSection 43BSection 92C

2451/Mum/2022 WNS Global Services Pvt Ltd submitted the valuation report showing the calculation of value of shares as reproduced hereunder:- “7.2 Method for valuation of shares by the Assessee: 7.2.1 It is seen from form 3CEB as well as TPSR that during the year under consideration assessee has acquired ... assessee, without prejudice, as a matter of abundant caution, has disclosed the above international transaction by adopting (other method). For the purpose of valuation of shares, the assessee adopted the weighted average of two methods, namely, markets multiple method (MMM) and discounted cash flow method

DCIT, Central Circle-17, New Delhi vs. Caddie Hotels Pvt Ltd., New Delhi

In the result the appeal of the assessee in ITA No

ITA 1724/DEL/2022[2017-18]Status: DisposedITAT Delhi21 Jul 2023AY 2017-18

Bench: Shri N.K. Billaiya & Shri Anubhav Sharma

For Appellant: Shri Ajay Vohra, AdvFor Respondent: Shri T. James Singson, CIT- DR
Section 143(3)Section 263Section 56(2)Section 56(2)(viib)

apart from the valuation report of the Chartered Accountant. 11. While completing assessment u/s 143(3) of the Act, the Assessing Officer discarded valuation of shares as submitted by the assessee. The Assessing Officer was of the firm belief that as the shares are issued at premium and value ... dispose the appeals of the four A.Ys by a common order. 14. After considering the facts and submissions and finding that the valuation of shares is duly supported by a valuation report as per Rule 11UA of the IT Rules, the ld. CIT(A) observed as under: “(i) Section

DCIT, Central Circle-17, New Delhi vs. Caddie Hotels Pvt. Ltd., Delhi

In the result the appeal of the assessee in ITA No

ITA 1723/DEL/2022[2016-17]Status: DisposedITAT Delhi21 Jul 2023AY 2016-17

Bench: Shri N.K. Billaiya & Shri Anubhav Sharma

For Appellant: Shri Ajay Vohra, AdvFor Respondent: Shri T. James Singson, CIT- DR
Section 143(3)Section 263Section 56(2)Section 56(2)(viib)

apart from the valuation report of the Chartered Accountant. 11. While completing assessment u/s 143(3) of the Act, the Assessing Officer discarded valuation of shares as submitted by the assessee. The Assessing Officer was of the firm belief that as the shares are issued at premium and value ... dispose the appeals of the four A.Ys by a common order. 14. After considering the facts and submissions and finding that the valuation of shares is duly supported by a valuation report as per Rule 11UA of the IT Rules, the ld. CIT(A) observed as under: “(i) Section

DCIT, Central Circle-17, New Delhi vs. Caddie Hotels P.Ltd, New Delhi

In the result the appeal of the assessee in ITA No

ITA 1722/DEL/2022[2015-16]Status: DisposedITAT Delhi21 Jul 2023AY 2015-16

Bench: Shri N.K. Billaiya & Shri Anubhav Sharma

For Appellant: Shri Ajay Vohra, AdvFor Respondent: Shri T. James Singson, CIT- DR
Section 143(3)Section 263Section 56(2)Section 56(2)(viib)

apart from the valuation report of the Chartered Accountant. 11. While completing assessment u/s 143(3) of the Act, the Assessing Officer discarded valuation of shares as submitted by the assessee. The Assessing Officer was of the firm belief that as the shares are issued at premium and value ... dispose the appeals of the four A.Ys by a common order. 14. After considering the facts and submissions and finding that the valuation of shares is duly supported by a valuation report as per Rule 11UA of the IT Rules, the ld. CIT(A) observed as under: “(i) Section

DCIT, Central Circle-17, New Delhi vs. Caddie Hotels P.Ltd, New Delhi

In the result the appeal of the assessee in ITA No

ITA 1721/DEL/2022[2014-15]Status: DisposedITAT Delhi21 Jul 2023AY 2014-15

Bench: Shri N.K. Billaiya & Shri Anubhav Sharma

For Appellant: Shri Ajay Vohra, AdvFor Respondent: Shri T. James Singson, CIT- DR
Section 143(3)Section 263Section 56(2)Section 56(2)(viib)

apart from the valuation report of the Chartered Accountant. 11. While completing assessment u/s 143(3) of the Act, the Assessing Officer discarded valuation of shares as submitted by the assessee. The Assessing Officer was of the firm belief that as the shares are issued at premium and value ... dispose the appeals of the four A.Ys by a common order. 14. After considering the facts and submissions and finding that the valuation of shares is duly supported by a valuation report as per Rule 11UA of the IT Rules, the ld. CIT(A) observed as under: “(i) Section

Caddie Hotels Pvt. Ltd., Delhi vs. Pr. CIT Central Circle 17, Delhi

In the result the appeal of the assessee in ITA No

ITA 2014/DEL/2021[2014-15]Status: DisposedITAT Delhi21 Jul 2023AY 2014-15

Bench: Shri N.K. Billaiya & Shri Anubhav Sharma

For Appellant: Shri Ajay Vohra, AdvFor Respondent: Shri T. James Singson, CIT- DR
Section 143(3)Section 263Section 56(2)Section 56(2)(viib)

apart from the valuation report of the Chartered Accountant. 11. While completing assessment u/s 143(3) of the Act, the Assessing Officer discarded valuation of shares as submitted by the assessee. The Assessing Officer was of the firm belief that as the shares are issued at premium and value ... dispose the appeals of the four A.Ys by a common order. 14. After considering the facts and submissions and finding that the valuation of shares is duly supported by a valuation report as per Rule 11UA of the IT Rules, the ld. CIT(A) observed as under: “(i) Section

Hri Healthcare Pvt Ltd., Mumbai vs. Asst. CIT Circle-10(1)(1), Mumbai

In the result, the appeal of the assessee is allowed

ITA 2437/MUM/2019[2015-16]Status: DisposedITAT Mumbai11 Jul 2023AY 2015-16

Bench: Shri Aby T Varkey & Shri Amarjit Singhhri Healthcare Pvt. Ltd. Vs. Asst. Commissioner Of 602, 6Th Floor, Supreme Income Tax, Circle Chambers, Off Veera 10(1)(1), Aaykar Bhavan, Desai Road, Andheri (W) 2Nd Floor, Mumbai – 400053 Mumbai - 400021 स्थायी लेखा सं./जीआइआर सं./Pan/Gir No: Aacch7613M Appellant .. Respondent [ Appellant By : K. Gopal Respondent By : Soumendu Kumar Dash Date Of Hearing 16.06.2023 Date Of Pronouncement 11.07.2023 आदेश / O R D E R Per Amarjit Singh (Am): This Appeal Filed By The Assesse Is Directed Against The Order Passed By The Cit(A)-17, Mumbai, Dated 28.01.2019 For A.Y. 2015-16. The Assessee Has Raised The Following Grounds Before Us: “1.1 The Learned Assessing Officer Erred In Making An Addition Of Rs.4,96,08,000 Under Section 56(2)(Viib) Of The Income-Tax Act, 1961 ("The Act') Being The Difference Between The Share Premium Received By The Appellant From Its Holding Company & The Fair Market Value Of The Shares There Of As Computed Under Rule 11Ua Of The Income-Tax Rules, 1962( The Rules") & Cit(A) In Confirming The Same 1.2 The Assessing Officer Erred In Holding The Issue Price Of Right Shares To Existing Shareholder Of The Company Which Were Adopted On The Basis Of A Valuation Report Of An Independent Valuer As Exorbitant On Reasons Purely In The Realm Of Conjectures/Surmises Without Appreciating That The Same Is In Accordance With Provisions Of The Act & Cit(A) In Confirming The Same. 1.3 It Is Submitted That Valuation Is An Art & Not A Science. The Valuation Are Based On Certain Assumptions & Estimations Especially In Case Of New Company. The Valuation Has Been Done Based On The Dcf Method

For Appellant: K. GopalFor Respondent: Soumendu Kumar Dash
Section 143(2)Section 56(2)(viib)

left to the consideration and wisdom of experts in the field of accountancy, having regard to the imponderables which enter the process of valuation of shares. The Appellant-Revenue is unable to demonstrate that the methodology adopted by the Respondent-Assessee is not correct. The AO has simply rejected

DCIT CC 3(4) Cen RG 3, Mumbai vs. Patel Engineering Ltd, Mumbai

In the result, appeal filed by the assessee is dismissed

ITA 2486/MUM/2017[2007-08]Status: DisposedITAT Mumbai07 Jul 2023AY 2007-08

Bench: Shri Aby T. Varkey, Hon'Ble & Shri S. Rifaur Rahman, Hon’Ble

Section 14ASection 154Section 199(2)Section 80I

value at which the buy-back of shares has been undertaken by the investee subsidiary company, the CIT(A) noted that the valuation of shares has not been disputed by the Transfer Pricing Officer during the proceedings before him. In fact, the CIT(A) has categorically observed that the Transfer ... Before parting, we refer to the argument set-up by the Ld. Departmental Representative that the matter of valuation of shares be examined afresh by the Transfer Pricing Officer as per the Discounted Cash Flow(DCF) method and in this context, he referred to the decision of the Chennai Bench

DCIT CC 3(4) Cen RG 3, Mumbai vs. Patel Engineering Ltd, Mumbai

In the result, appeal filed by the assessee is dismissed

ITA 2485/MUM/2017[2006-07]Status: DisposedITAT Mumbai07 Jul 2023AY 2006-07

Bench: Shri Aby T. Varkey, Hon'Ble & Shri S. Rifaur Rahman, Hon’Ble

Section 14ASection 154Section 199(2)Section 80I

value at which the buy-back of shares has been undertaken by the investee subsidiary company, the CIT(A) noted that the valuation of shares has not been disputed by the Transfer Pricing Officer during the proceedings before him. In fact, the CIT(A) has categorically observed that the Transfer ... Before parting, we refer to the argument set-up by the Ld. Departmental Representative that the matter of valuation of shares be examined afresh by the Transfer Pricing Officer as per the Discounted Cash Flow(DCF) method and in this context, he referred to the decision of the Chennai Bench

Joint Commissioner of Income Tax (OSD) Circle-3, Ferozepur vs. Measage Om Sons Marketing Private Limited, Faridkot

In the result, the appeal of the revenue bearing ITA No

ITA 407/ASR/2019[2015-16]Status: DisposedITAT Amritsar07 Jul 2023AY 2015-16

Bench: Dr. M. L. Meena & Sh. Anikesh Banerjee

Section 143(3)Section 250(6)Section 37(1)Section 56(2)(viib)

grounds: “i) The CIT(A) erred in deleting the addition made u/s 56(2)(viib) of the Act by accepting DCF method of valuation of shares without appreciating that DCF method was rejected by the AO after finding discrepancies in the basis of valuation. (ii) The CIT(A) erred ... method prescribed under 11UA of the Income Tax Rules, 1962 (in brevity the Rule).As per the assessee, the report for the valuation of shares as per Discounted Cash Flow (in brevity DCF) method duly signed by the Chartered Accountant was rejected by the ld. AO without giving any valid

Pingash Home Appliances Private Limited, Faridabad vs. ITO Ward-2(1), Faridabad

In the result, appeal of the assessee is allowed

ITA 106/DEL/2021[2016-17]Status: DisposedITAT Delhi07 Jul 2023AY 2016-17

Bench: Shri Saktijit Dey, Vice- & Shri Girish Agrawal

For Appellant: Shri Rajiv Saxena and Shyam Sunder, AdvsFor Respondent: Shri Ram Dhan Meena, Sr. DR
Section 143(2)Section 143(3)Section 250(2)Section 251(1)Section 271Section 56Section 56(2)Section 68

report alongwith li. [2.6.2018 balance sheet and profit and loss account for FY A 2015 - 16 relevant to A.Y. 2016 - 17 58-60 Valuation of share as per DCF method. iii. 61-65 Notice u/s 142(1) of the Act along with replies. ivw furnished. 66-67 Ledger ... addition cannot be sustained merely based on inferences made from circumstances and without gathering evidence. A 9. In respect of valuation of shares for charging of share premium, learned Assessing Officer himself has noted in the impugned order that assessee had furnished a Valuation Report obtained by it from

Thinkstations Learning Private Limited, New Delhi vs. ACIT Circle-8(1), New Delhi

In the result, both the appeals of the assessee are allowed

ITA 9824/DEL/2019[2015-16]Status: DisposedITAT Delhi04 Jul 2023AY 2015-16

Bench: Shri Narendra Kumar Billaiya & Shri Challa Nagendra Prasad

For Appellant: Advocate
Section 139(1)Section 142(1)Section 143(2)Section 143(3)Section 56(2)(viib)

submit the valuation report and the report was submitted. The Assessing Officer noticed that the assessee followed Discounted Cash Flow (DCF) Method for valuation of share price. The Assessing Officer 2 ITA. Nos. 9824 & 7345/Del/2019 referring to the provisions of section 56(2)(viib) and the explanation ... satisfaction of the Assessing Officer. The Assessing Officer was of the view that DCF method followed by the assessee for the valuation of shares is nothing but assumption for projected of cash flow and stated to be not only unjustified and un-related to the actual financial position

Thinkstations Learning Private Limited, New Delhi vs. ACIT Circle-25(1), New Delhi

In the result, both the appeals of the assessee are allowed

ITA 7345/DEL/2019[2016-17]Status: DisposedITAT Delhi04 Jul 2023AY 2016-17

Bench: Shri Narendra Kumar Billaiya & Shri Challa Nagendra Prasad

For Appellant: Advocate
Section 139(1)Section 142(1)Section 143(2)Section 143(3)Section 56(2)(viib)

submit the valuation report and the report was submitted. The Assessing Officer noticed that the assessee followed Discounted Cash Flow (DCF) Method for valuation of share price. The Assessing Officer 2 ITA. Nos. 9824 & 7345/Del/2019 referring to the provisions of section 56(2)(viib) and the explanation ... satisfaction of the Assessing Officer. The Assessing Officer was of the view that DCF method followed by the assessee for the valuation of shares is nothing but assumption for projected of cash flow and stated to be not only unjustified and un-related to the actual financial position

ACIT Circle-34(1), New Delhi vs. Ashok Kumar Minda (HUF), New Delhi

ITA 133/DEL/2020[2016-17]Status: DisposedITAT Delhi28 Jun 2023AY 2016-17

Bench: Sh. Anil Chaturvedi & Sh. Anubhav Sharmaacit, Vs. Ashok Kumar Minda (Huf) Circle-34(1), A-15, Phase-1, New Delhi Ashok Vihar, New Delhi Pan : Aagha2440A (Appellant) (Respondent)

Section 143(1)

erred in deleting the addition of Rs. 1,63,38,478/- made on account of LTCG by AO, ignoring the fact that of valuation of shares of market rate. 3. That the appellant craved leave to add/delete/ modify the grounds of appeal at any time during hearing of appeal

Ai-Yaseen Trading Co.P.Ltd, Meerut vs. ITO, Ward-1(1), Meerut

In the result, the appeal filed by the assessee is allowed

ITA 6244/DEL/2017[2013-14]Status: DisposedITAT Delhi28 Jun 2023AY 2013-14
Section 56(2)(vii)Section 56(2)(viib)

report not matching with the actually performance in our considered view, is an irrelevant consideration. Usage of DCF method for the purpose of valuation of shares is an approved method in Rule 11U and 11UA of the Income Tax Rules. On perusal of the said Rules, an option is given ... section 56(2)(viib) of the Act read with Rule 11U and 11UA of the Rules, the assessee has an option to do valuation of shares and determine fair market value either using DCF method or NAV method and Assessing Officer cannot examine or substitute his own value in place