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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

DCIT-CC 5(2), Central Range 5, Mumbai vs. M/S Jet Privilege Private Limited, Mumbai

In the result, appeal of the Revenue is dismissed

ITA 652/MUM/2023[2014-15]Status: DisposedITAT Mumbai22 Jun 2023AY 2014-15

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

Section 56(2)(viib)Section 68

stated the price of shares issued to persons resident outside India under this Schedule shall not be less than:— (a)** ** * (b) the fair valuation of shares done by SEBI registered Category-I Merchant banker or a Chartered Accountant as per the discounted free cash flow method, where the shares ... hands of the shareholders before the transaction can be accepted as a genuine one. Even the amended section docs not envisage the valuation of share premium. This is further evident from a parallel amendment in section 56(2) of the Act which brings in its ambit so much

Manhar Yarns Private Limited, Ballabgarh vs. ITO Ward-1(5), Faridabad

In the result, the Appeal of the Assessee is partly allowed

ITA 97/DEL/2021[2016-17]Status: DisposedITAT Delhi20 Jun 2023AY 2016-17

Bench: Dr. B. R. R. Kumar & Shri Yogesh Kumar U.S.

For Appellant: Sumangla Saxena, Adv &For Respondent: . Arvind Kumar Bansal
Section 143(3)Section 251(1)Section 271(1)(c)Section 56(2)Section 56(2)(viib)Section 68

determined in accordance with such method as may be prescribed. For the purpose of section 56(2)(viib) of the Act, the valuation of shares has to be done in accordance with the Rule 11UA of the Income Tax Rules. For the sake of convenience, relevant provisions of Rule 11UA

Movefast Tour & Travels Pvt. Ltd, Faridabad vs. ITO Ward-1(5), Faridabad

In the result, the Appeal of the Assessee is partly allowed

ITA 96/DEL/2021[2016-17]Status: DisposedITAT Delhi20 Jun 2023AY 2016-17

Bench: Dr. B. R. R. Kumar & Shri Yogesh Kumar U.S.I.T.A. No. 96/Del/2021 (A.Y. 2016-17) Movefast Tour & Travels Pvt. Ltd. Vs. Ito Plot No. 1066, Baba Nagar, Near Ward-1(5) Janta Barat Ghar, Faridabad, C. R. Building, Faridabad Haryana Haryana Pan No. Aaicm2608P ( Respondent ) ( Appellant )

For Appellant: Sumangla Saxena, Adv &For Respondent: . Arvind Kumar Bansal
Section 143(3)Section 251(1)Section 271(1)(c)Section 56Section 56(2)(viib)Section 68

determined in accordance with such method as may be prescribed. For the purpose of section 56(2)(viib) of the Act, the valuation of shares has to be done in accordance with the Rule 11UA of the Income Tax Rules. For the sake of convenience, relevant provisions of Rule 11UA

Nelumbo Paints Pvt. Ltd., Haryana vs. ITO Ward 2(1), Haryana

In the result, the Appeal of the Assessee is partly allowed

ITA 85/DEL/2021[2016-17]Status: DisposedITAT Delhi20 Jun 2023AY 2016-17

Bench: Dr. B. R. R. Kumar & Shri Yogesh Kumar U.S.

For Appellant: Sumangla Saxena, Adv &For Respondent: . Arvind Kumar Bansal
Section 143(3)Section 251(1)Section 271(1)(c)Section 56Section 56(2)(viib)Section 68

determined in accordance with such method as may be prescribed. For the purpose of section 56(2)(viib) of the Act, the valuation of shares has to be done in accordance with the Rule 11UA of the Income Tax Rules. For the sake of convenience, relevant provisions of Rule 11UA

Abhi Soaps Private Limited, Faridabad vs. ITO Ward - 1(1), Faridabad

In the result, the Appeal of the Assessee is partly allowed

ITA 79/DEL/2021[2016-17]Status: DisposedITAT Delhi20 Jun 2023AY 2016-17

Bench: Shri Anil Chaturvedi & Shri Yogesh Kumar U.S.

For Appellant: Sumangla Saxena, AdvFor Respondent: Sh. Kanv Bali, Sr. DR
Section 133(6)Section 143(3)Section 251(1)Section 271(1)(c)Section 56Section 56(2)(viib)Section 68

determined in accordance with such method as may be prescribed. For the purpose of section 56(2)(viib) of the Act, the valuation of shares has to be done in accordance with the Rule 11UA of the Income Tax Rules. For the sake of convenience, relevant provisions of Rule 11UA

Movefast Automobiles Private Limited, Haryana vs. ITO Ward-1(5), Faridabad

In the result, the Appeal of the Assessee is partly allowed

ITA 101/DEL/2021[2016-17]Status: DisposedITAT Delhi20 Jun 2023AY 2016-17

Bench: Dr. B. R. R. Kumar & Shri Yogesh Kumar U.S.

For Appellant: Sumangla Saxena, Adv &For Respondent: . Arvind Kumar Bansal
Section 143(3)Section 251(1)Section 271(1)(c)Section 56(2)Section 56(2)(viib)Section 68

determined in accordance with such method as may be prescribed. For the purpose of section 56(2)(viib) of the Act, the valuation of shares has to be done in accordance with the Rule 11UA of the Income Tax Rules. For the sake of convenience, relevant provisions of Rule 11UA

Madhava Home Decor Pvt Ltd, Faridabad vs. ITO Ward - 1(5), Faridabad

In the result, the Appeal of the Assessee is partly allowed

ITA 82/DEL/2021[2016-17]Status: DisposedITAT Delhi16 Jun 2023AY 2016-17

Bench: Dr. B. R. R. Kumar & Shri Yogesh Kumar U.S.

For Appellant: Sumangla Saxena, Adv &For Respondent: . Arvind Kumar Bansal
Section 143(3)Section 251(1)Section 271(1)(c)Section 56Section 56(2)(viib)Section 68

determined in accordance with such method as may be prescribed. For the purpose of section 56(2)(viib) of the Act, the valuation of shares has to be done in accordance with the Rule 11UA of the Income Tax Rules. For the sake of convenience, relevant provisions of Rule 11UA

ACIT, Circle- 2(2), New Delhi vs. Ansal Condominium Pvt. Ltd., New Delhi

Appeal is allowed

ITA 760/DEL/2019[2015-16]Status: DisposedITAT Delhi16 Jun 2023AY 2015-16

Bench: Dr. B.R.R. Kumar & Shri Yogesh Kumar Us

For Appellant: Shri R. S. Singhvi, Advocate; &For Respondent: Shri P. Praveen Sidharth
Section 143(2)Section 14ASection 56(2)(viia)

addition of Rs.24,01,57,001/- under section 56(2)(viia) of the Income Tax Act, 1961 on account of difference in valuation of shares as per book value and the value adopted as per DCF Method.” 3. Brief facts of the case are that, the assessee filed return declaring ... erred in deleting the addition of Rs. 24,01,57,001/- u/s 56(2)(viia) of the Act on account of different in valuation of shares as per book value and the value adopted as per DCF Method. 6. The Ld. DR relying on the order of the assessment order

Tpg Growth II Makets Pte Ltd., Mumbai vs. DCIT 4(1)(2), Mumbai

Accordingly, Ground No. 4 raised by the Appellant is partly allowed

ITA 1387/MUM/2022[2017-18]Status: DisposedITAT Mumbai06 Jun 2023AY 2017-18
For Appellant: Shri Dinesh BafnaFor Respondent: Dr. Samuel Pitta
Section 143(3)Section 144C(13)Section 144C(5)Section 5Section 9Section 92C(3)

independent valuation expert for valuation of equity shares of SIPL and QNPL without providing cogent reasons; c) Adopting actual financial results for valuation of shares by replacing the projected financial values in original valuation, completely disregarding the fact that Discounted Cash Flow ('DCF") method of valuation takes into account future ... report issued by independent valuation expert for valuation of equity shares of QNPL without providing cogent reasons; c) Adopting actual financial results for valuation of shares results by replacing the projected financial values in original valuation, completely disregarding the fact that DCF method of valuation takes into account future projections

Dy, CIT 6(1)(1), Mumbai vs. M/S Epc Offshore Subsea Projects Ltd, Mumbai

ITA 3834/MUM/2017[2009-10]Status: DisposedITAT Mumbai26 May 2023AY 2009-10
For Appellant: Shri Biswanath DasFor Respondent: None
Section 143(3)Section 148Section 68

also an important aspect in case where the transactions of this nature pertain to a Private Limited Company. The issue of basis of valuation of shares and charging of premium is also required to be examined. It needs to be appreciated that the issue of share premium cannot be decided

Strides Arcolab Ltd, Navi Mumbai vs. DCIT Cir 15(3)(2), Mumbai

The appeal of the assessee is allowed

ITA 1903/MUM/2015[2010-11]Status: DisposedITAT Mumbai23 May 2023AY 2010-11

Bench: Amit Shukla () & Ms. Padmavathy S. ()

Section 10BSection 115JSection 143(3)Section 144CSection 14ASection 35Section 92C

assessee and was not intended to be a tax saving exercise. The DRP, after considering the submissions of the assessee re-worked the valuation of shares using discounted cash flow method to arrive at value per share at Zar 4754.32. The DRP concluded 25 ITA 1903/Mum/2015 M/s Strides Arcolab Limited ... valuation was carried out and as such no specific method for valuation was prescribed. The Net Asset Value (‘NAV’) method is appropriate for valuation of shares. Reliance can be placed in this regard on the following wherein NAV method has been considered as a method for valuation of shares:  Rule

Sis Prosegur Holdings Pvt Ltd, Patna vs. Pr.CIT-1, Patna

In the result, the appeal of the assessee stands dismissed

ITA 47/PAT/2021[2015-16]Status: DisposedITAT Patna18 May 2023AY 2015-16

Bench: Shri Sanjay Garg & Shri Girish Agrawali.T.A. No.47/Pat/2021 Assessment Year: 2015-16 Sis Prosegur Holdings Pvt. Ltd...…………....….........…..........….…… Appellant Annapoorna Bhawan, Patliputra Telephone Exchange, Kurji, Patna, Bihar-800010 [Pan: Aaucs7524A] Vs. Pcit-1, Patna..................................…………........….....…...…..…..... Respondent Appearances By: Shri Nageswar Rao, Adv., Appeared On Behalf Of The Appellant. Smt. Rinku Singh, Cit-Dr, Appeared On Behalf Of The Respondent. Date Of Concluding The Hearing : May 18, 2023 Date Of Pronouncing The Order : May 18, 2023 आदेश / Order संजय गग", "या"यक सद"य "वारा / Per Sanjay Garg: The Present Appeal Has Been Preferred By The Assessee Against The Revision Order Dated 25.03.2021 Of The Principal Commissioner Of Income Tax-1, Patna [Hereinafter Referred To As ‘Pcit’] Passed U/S 263 Of The Income Tax Act (Hereinafter Referred To As The ‘Act’). 2. The Brief Facts Of The Case Are That The Ld. Pcit While Examining Assessment Records Found That The Assessee During The Year Had Issued 900000 Equity Shares Of Rs.10/- At A Premium Of Rs.90/- Per Share Totalling Rs.100/- Per Share. The Ld. Pcit Further Observed As Under: It Is To Be Noted That, During The Year Under Consideration, The Provisions Of Section 56(2)(Viib) Were Applicable As Per Which If Aggregate Consideration For Issuance Of Shares Is More Than Fair Market

Section 143(3)Section 263Section 56(2)(viib)

order passed by the Assessing Officer was erroneous so far as it was prejudicial to the interest of the revenue observing that the valuation of shares arrived at by the accountant as per DCF (Discounted Cash Flow Method) method at Rs.97/- per share relying on the arbitrary values, figures ... forth any cogent explanation with supporting documents, substantiating that the Assessing Officer has completed the assessment after making enquiries, verification with regard to valuation of share made by the valuer at Rs. 97 per share. A perusal of the details available on record shows that book value as per balance

ACIT Circle-10(1), New Delhi vs. Gamma Pizzakraft (Overseas) Pvt Ltd, New Delhi

In the result, the appeal of the Revenue is dismissed

ITA 1309/DEL/2020[2016-17]Status: DisposedITAT Delhi12 May 2023AY 2016-17

Bench: Sh. C. M. Gargdr. B. R. R. Kumar

For Appellant: Sh. T. M. Shiva Kumar, Adv. &For Respondent: Mohd. Gayasuddin Ansari, CIT DR
Section 143(3)Section 31(1)Section 56(2)(viib)

erred in deleting the addition of Rs.24,80,39,169/- made by the AO on account of valuation of shares at a premium of Rs.55.65 per share u/s 56(2)(viib) of the Income Tax Act, 1961.” 2 Gamma Pizzakraft (Overseas) Pvt. Ltd. Facts of the Case: 3. The assessee ... prepared by him. During recoding of statement, Mr. Ashok Kumar Verma accepted that DCF is based on projections and if projections have failed valuation of shares will lose their its sanctity. Further, if assessee was aware that in upcoming years, it will perform as per projections made in DCF report

Jacobinia Laboratories P.Ltd, New Delhi vs. ITO, Ward-10(1), New Delhi

In the result, appeal of the assessee is dismissed

ITA 536/DEL/2019[2014-15]Status: DisposedITAT Delhi17 Mar 2023AY 2014-15

Bench: Sh. Anil Chaturvedi & Sh. N.K Choudhryjacobinia Laboratories Pvt. Ltd., Vs. Ito, Ward-10(1), 21-Cottage Enclave, Paschim New Delhi 110001 Vihar, Rohtak Road, New Delhi 110063 Pan No. Aagcg 3024 M (Appellant) (Respondent) Assessee By None Revenue By Mohd. Gayasuddin Ansari, Sr. Dr Date Of Hearing: 09.03.2023 Date Of Pronouncement: 17.03.2023 Order Per Anil Chaturvedi, Am : This Appeal Filed By The Assessee Is Directed Against The Order Dated 05.11.2018 Of The Commissioner Of Income Tax (Appeals)-4,New Delhi Relating To Assessment Year 2014-15. 2. Brief Facts Of The Case As Culled Out From The Material On Record Are As Under :-

Section 143(3)Section 197Section 68Section 69C

appellant company because every investor wants to earn income from investment in the form of dividend as well as expects appreciation in the valuation of shares with the growth of business. The genuineness of the transactions is not proved at all because the appellant has failed to produce its Directors

DCIT, Circle-14(2), New Delhi vs. Kissandhan Agri Financial Services Pvt. Ltd., Delhi

In the result, the appeal of the Revenue is dismissed

ITA 8734/DEL/2019[2016-17]Status: DisposedITAT Delhi15 Mar 2023AY 2016-17

Bench: Shri Kul Bharat & Shri Pradip Kumar Kedia

For Appellant: Shri Atul Ninawat, CAFor Respondent: Shri Javed Akhtar, CIT-DR
Section 143(3)Section 56(2)(viib)

going through the contentions of the appellant, it is seen that the working has been made by an independent valuer, submitting the valuation of share as per discount cash flow method. Further, as per the provisions of law, the appellant can take higher of the amount between the working ... I.T.A. No.8734/DEL/2019 13 consideration and wisdom of experts in the field, having regard to the imponderables which enter the process of valuation of shares. The Hon’ble High Court thus upheld the action of the ITAT and consequently the additions made under the deeming provisions of Section 56(2)(viib

DCIT, CC-2, Jaipur vs. Shri Vimal Chand Surana(HUF), Jaipur

In the result, the appeal of the revenue stands dismissed

ITA 62/JPR/2020[2008-09]Status: DisposedITAT Jaipur06 Mar 2023AY 2008-09

Bench: SHRI SANDEEP GOSAIN (Judicial Member), SHRI RATHOD KAMLESH JAYANTBHAI (Accountant Member)

For Appellant: Shri S.R. Sharma (CA) &For Respondent: Shri A.S. Nehra (Addl.CIT) fu/kZkfjrh dh vksj ls@
Section 139Section 143Section 147Section 150(2)Section 153CSection 2Section 250Section 69

Chand Surana HUF shares of M/s Kalyan Buildmart Pvt. Ltd. which owned the land in question. There may be a case of under valuation of shares and understatement of consideration paid by the assessee, however, it is not a case of purchase of land. The purchase consideration of shares

Shri Madho Lal Saini, Jaipur vs. ITO, Ward-2(3), Jaipur

In the result, the appeals of the assessees are allowed

ITA 238/JPR/2020[2007-08]Status: DisposedITAT Jaipur06 Mar 2023AY 2007-08

Bench: SHRI SANDEEP GOSAIN (Judicial Member), SHRI RATHOD KAMLESH JAYANTBHAI (Accountant Member)

For Appellant: Shri Rajeev Sogani (CA) &For Respondent: Shri S. Najmi (CIT)
Section 139(1)Section 147Section 148Section 151Section 250Section 54BSection 54FSection 69

Gupta were the shares of M/s Kalyan Buildmart Pvt. Ltd. which owned the land in question. There may be a case of under valuation of shares and understatement of consideration paid by the assessee however, it is not a case of purchase of land. The purchase consideration of shares

Planet Gogo Private Ltd., Gurgaon vs. ITO Ward-3(2), Gurgaon

In the result, the appeal is allowed

ITA 1526/DEL/2022[2016-17]Status: DisposedITAT Delhi24 Feb 2023AY 2016-17

Bench: Shri Saktijit Deyassessment Year: 2016-17

Section 56(2)Section 56(2)(viib)

intangible assets, whichever is higher. Rule 11UA, prescribes the method for determination of fair market value. It is nobody’s case that the valuation of shares by the independent valuer is not in accordance with the statutory provisions. In fact, the departmental authorities have accepted the position that ... 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

Saif Partners India IV Limited, Delhi vs. ACIT Int. Taxation-3(1)(2), Delhi

In the result, the appeal of the assessee in ITA No

ITA 1138/DEL/2022[2017-18]Status: DisposedITAT Delhi13 Feb 2023AY 2017-18

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

For Appellant: Shri Kanchun Kaushal, FCAFor Respondent: Ms. Meenakshi Singh – CIT-DR
Section 10(34)Section 10(38)Section 142Section 142(1)Section 143(2)Section 143(3)Section 263

However, the AO has not verified the veracity of such claim by calling for the basis of valuation of shares and verification thereof. It also disposed of shares of Manpasand Beverages Ltd with capital loss of 22,91,85,105. No verification what so ever in this regard was also

ACIT, Circle-7(2), New Delhi vs. Drishti Soft Solutiions Private Limited, New Delhi

In the result, appeal of the Revenue is dismissed

ITA 8523/DEL/2019[2016-17]Status: DisposedITAT Delhi10 Feb 2023AY 2016-17

Bench: Sh. Anil Chaturvedi & Sh. Yogesh Kumar Usacit Vs. Drishti Soft Solutions Pvt. Circle – 7(2), Ltd., F-2, 40 Feet Road, New Delhi Ganga Vihar, Gokulpur, New Delhi – 110 094 Pan No. Aabcd 9373 R (Appellant) (Respondent) Assessee By Shri K. M. Gupta, Adv. & Shri Rishabh Malhotra, A.R. Revenue By Shri T. James Singson, Cit-D.R. Date Of Hearing: 06.02.2023 Date Of Pronouncement: 10.02.2023 Order Per Anil Chaturvedi, Am : This Appeal Filed By The Revenue Is Directed Against The Order Dated 19.09.2019 Of The Commissioner Of Income Tax (Appeals)-3, New Delhi Relating To Assessment Year 2016-17. 2. Brief Facts Of The Case As Culled Out From The Material On Record Are As Under :-

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

Method (DCFM) to arrive at the value of each share. He noted that the assumptions taken by the CA for the purpose of valuation of shares was not based on any reliable facts and the figures taken at the time of valuation did not match with the actual figures ... realistic and did not match with the actual financial condition of the assessee. He, thereafter, by following the method of calculation of valuation of shares as prescribed under Rule 11UA of the Income- tax Rule, 1962, worked out the fair market value of each share at Rs.169.88/- per share