“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

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

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

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

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

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

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

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

Jatinder Kumar Suri, New Delhi vs. DCIT, Circle- 3(1)(2), International Taxation, New Delhi

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

ITA 6808/DEL/2017[2013-14]Status: DisposedITAT Delhi01 Feb 2023AY 2013-14

Bench: N.K. Billaiya & Ms. Astha Chandraasstt. Year: 2013-14

For Appellant: NoneFor Respondent: Shri Vivek Vardhan, Sr. DR

Section 194JSection 44ASection 69C

conduct of the business of the assessee is The AO has disallowed a loss of Rs 2,01.00,000 on account of valuation of shares purchased by the assessee during the year and held stock for the purposes of his business by treating the transaction as a transaction. The assessee

Sherda Polyster Pvt. Ltd., Mumbai vs. The Income Tax Officer, Ward-2(1)(2), Surat

In the result, the appeal filed by the assessee is allowed for statistical purposes

ITA 763/AHD/2017[2012-13]Status: DisposedITAT Surat30 Jan 2023AY 2012-13

Bench: Shri Pawan Singh, Jm & Dr. A. L. Saini, Am आयकर अपील सं./Ita No.763/Ahd/2017 "नधा"रणवष"/Assessment Year: (2012-13) (Physical Court Hearing) Sherda Polyster Pvt. Ltd., Vs. The Ito, Ward-2(1)(2), C/O Dk Jhanwar & Associates, Surat. 705, Morya Bluemoon, Near Monginis Cake Factory, Opp. City Mall, Link Road, Andheri West, Mumbai-400053. (Appellant) (Respondent) "थायीलेखासं./जीआइआरसं./Pan/Gir No.: Aadcs3803P

Section 131Section 133(6)Section 143(3)Section 68

from Rs.30 lacs to 38.60 lacs approved by the ROC (vide paper book page nos.41 to 46) (7) Valuation Report dated 30.06.2010 for valuation of shares as per DFCF methodology (vide paper book page nos.47 to 51). ITA 763/AHD/2017/AY.2012-13 Sherda Polyster Pvt. Ltd. (8) Share application Forms of the investors

Abhinav International Pvt. Ltd., New Delhi vs. DCIT Circle-1(1), New Delhi

In the result, appeal of appellant bearing Appeal

ITA 7822/DEL/2019[2013-14]Status: DisposedITAT Delhi23 Jan 2023AY 2013-14

Bench: Shri Chandra Mohan Garg & Shri Pradip Kumar Kedia

For Appellant: NoneFor Respondent: Shri Kanav Bali, Sr.DR

Section 143(3)Section 14ASection 271(1)(c)Section 56(2)(viib)

market value. Ld. CIT (Appeals) confirmed this addition as the appellant did not submit any evidence in support of its claim of for valuation of shares at Rs. 71.04 per share. The appellant paid interest of Rs. 6,574/-on late deposit on TDS which was claimed as expense

Komal Indstries Pvt. Ltd., Surat vs. The Principal Commissioner of Income Tax, Surat

In the result, appeal filed by the assessee is dismissed

ITA 99/SRT/2022[2017-18]Status: DisposedITAT Surat23 Jan 2023AY 2017-18

Bench: Shri Pawan Singh, Jm & Dr. A. L. Saini, Am आयकर अपील सं./Ita No.99/Srt/2022 िनधा"रण वष"/Assessment Year: (2017-18) (Physical Court Hearing) Komal Industries Pvt. Ltd., Vs. Principal Commissioner Of Income B-904, International Commerce Tax-1, Aaykar Bhawan, Nr. Majura Centre, Ring Road, Near Gate, Opp New Civil Hospital, Kadiwala School, Surat–395002. Surat-395001 "थायीलेखासं./जीआइआरसं./Pan/Gir No.: Aadck6228Q (Appellant) (Respondent) िनधा"रती क" ओर से /Assessee By None (Written Submissions) राज"व क" ओर से /Respondent By Shri Ashok B. Koli, Cit-Dr सुनवाई क" तारीख/Date Of Hearing 05/01/2023 उ"ोषणा क" तारीख/Date Of Pronouncement 23/01/2023

Section 143(3)Section 263Section 44ASection 56(2)(viib)

details of issuance of share along with various documents. (b) The assessee company further stated that the assessee company had taken Certificate of valuation of shares from Statutory Auditor as well as other independent Chartered Accountant with regards to the valuation of shares and calculation of shares issued on premium ... other CA was left to be verified by the AO. Therefore, contentions of the assessee company is not correct, hence rejected. The valuation of shares, as submitted by the assessee during the assessment proceedings is not valid as per the definition of Accountant provided in Income Tax Rules

Punyah Building Materials Pvt. Ltd., Faridabad vs. ITO Ward 2(1), Faridabad

In the result, the appeal of the assessee is allowed

ITA 6171/DEL/2019[2015-16]Status: DisposedITAT Delhi19 Jan 2023AY 2015-16

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

Section 143(1)Section 143(3)Section 251Section 56(2)(viib)Section 68

states The valuer based its report not Disclaimer The valuer clearly states that the that it has used the on assumption or future valuation of shares is financial information projections exorbitantly, but not realistic and which is believed to be the report was given on the figures in the reliable ... 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

DCIT, Circle- 13(2), New Delhi vs. Jovees Herbal Care (I) Ltd., Delhi

In the result, appeal of the Revenue is 11

ITA 2528/DEL/2019[2014-15]Status: DisposedITAT Delhi16 Jan 2023AY 2014-15

Bench: Shri Anil Chaturvedi & Shri Anubhav Sharma

For Appellant: Shri Vinay Kumar, CAFor Respondent: Shri Anuj Garg, Sr. DR

Section 143(3)Section 56(2)

facts in deleting the addition made u/s. 56(2) (viib) of the Act when the Assessing Officer had rejected the valuation of shares as per discounted cash flow method applied by the assessee on the grounds of being unfounded and not supported by any substantive facts. 4. During the course ... cash flow statement but the shares were allotted at much higher price than fair market value (FMV). It was further stated that the valuation of share premium was based on discounted cash flow method which is an accepted method by CBDT for determining fair market value of the unquoted shares

ACIT, New Delhi vs. Shri Harish Bhandari, Delhi

In the result, the appeal of the Revenue is dismissed

ITA 3049/DEL/2016[2007-08]Status: DisposedITAT Delhi03 Jan 2023AY 2007-08

Bench: Dr. B. R. R. Kumarsh. Yogesh Kumar Us

For Appellant: Sh. P. C. Yadav, AdvFor Respondent: Sh. Shashi Bhushan Shukla, CIT DR

Section 132Section 17(2)(vi)Section 28

assessee is real or hypothetical; whether there is a corresponding liability of M/s RHL to pass on the benefits of the high valuation of shares; and the probability or improbability of realization of the benefits by the appellant considered from a realistic and practical point of view (the reversal

Essar Investments Ltd, Mumbai vs. DCIT 5(1), Mumbai

In the result, the present appeal is partly allowed

ITA 2195/MUM/2014[2009-10]Status: DisposedITAT Mumbai28 Dec 2022AY 2009-10

For Appellant: Shri Vijay MehtaFor Respondent: Ms. Samruddhi D Hande

Section 143(3)Section 144CSection 144C(5)

transferred to Rs.9,338.88 per share. 5. The learned TPO and the DRP erred in adopting the Discounted Cash Flow (DCF) method of valuation of shares for determining the arm's length price at which the shares ought to have been transferred. 6. The DRP erred in determining the value ... Rule 11UA is also based on Net Asset Value Approach adopted in the valuation report relied upon by the Appellant to support the valuation of shares of ECL. Therefore, accepting the without prejudice submission of the Appellant, we adopt the value of INR 112/- as the fair market value

Wns Global Services P. Ltd., Mumbai vs. Addl/Jt/Dy/Asstt/CIT/ITO, Nationa Faceless Assessment Centre, Dilhi

In the result, appeal filed by the assessee is allowed

ITA 1259/MUM/2021[2016-17]Status: DisposedITAT Mumbai09 Dec 2022AY 2016-17

Bench: Shri Vikas Awasthy & Shri Gagan Goyalwns Global Services Pvt. Ltd., Pl 10, Gate No.4, Godrej & Boyce Complex, Pirojshanagar, Lbs Marg, Vikhroli (West), Mumbai-400079. Pan: Aaacw2598L ...... Appellant Vs.. Addl./Jt/Dy./Acit/Ito/Nfac, Room No. 455, Circle-14(3)(1), Mumbai. ..... Respondent Appellant/Assessee By : Sh. Porus Kaka, Sr. Adv. & Sh. Manish Kant Respondent/Revenue By : Sh. Jasdeep Singh, Cit-Dr

For Appellant: Sh. Porus Kaka, Sr. Adv. &For Respondent: Sh. Jasdeep Singh, CIT-DR

Section 143(3)Section 144C(13)Section 92B

transaction of purchase of equity shares. c. erroneously not giving a specific show cause notice to the Appellant before arriving at the revised valuation of share in respect of the transaction of purchase of equity shares thereby denying the Appellant an opportunity of being heard. 10. On the fact ... amount received was added to the cash and bank balance of the AE and which should be added to arrive at the valuation of shares. 11. On the fact and in circumstances of the case and in law, the Hon'ble DRP erred in not adjudicating on merits the issues

Arjun Pulp and Paper India Pvt Ltd., Chennai vs. DCIT Corporate Circle 1(1), Chennai

The appeals stand dismissed

ITA 1558/CHNY/2019[2015-16]Status: DisposedITAT Chennai06 Dec 2022AY 2015-16

Bench: Hon’Ble Shri Mahavir Singh & Hon’Ble Shri Manoj Kumar Aggarwal, Am

For Appellant: Shri T.Shanmugam (Advocate)- Ld. ARFor Respondent: Shri P.Sajit Kumar (JCIT)-Ld. DR

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

Rs.7,77,61,860/- for the AY 2015-16. That the Ld. AO and the Ld. CIT (A) has erred in rejecting the valuation of shares adopted by the Appellant viz., Cash flow method for issuance of shares ... Income tax Rules. The Ld. CIT(A) has erred in providing relief to the assessee when she has rejected the basis of valuation of shares under the Discounted Cash Flow method but adopted valuation of equity share @Rs.100/- without following any method prescribed under the Act. 1.4 The Registry

DCIT, Corp Cir-1(1), Chennai vs. Arjun Pulp and Paper India Pvt Ltd, Chennai

The appeals stand dismissed

ITA 3445/CHNY/2018[2015-16]Status: DisposedITAT Chennai06 Dec 2022AY 2015-16

Bench: Hon’Ble Shri Mahavir Singh & Hon’Ble Shri Manoj Kumar Aggarwal, Am

For Appellant: Shri T.Shanmugam (Advocate)- Ld. ARFor Respondent: Shri P.Sajit Kumar (JCIT)-Ld. DR

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

Beetle Ventures Pvt. Ltd, Mumbai vs. ACIT 16(2), Mumbai

In the result, appeal filed by the assessee is allowed

ITA 836/MUM/2022[2015-16]Status: DisposedITAT Mumbai01 Dec 2022AY 2015-16

Bench: Shri Amit Shukla, Hon'Ble & Shri S. Rifaur Rahman, Hon'Blem/S. Beetle Ventures Private Limited V. Acit – 16(2) Unit No. 155 Room No. 440, 4Th Floor Shah & Nahar Industrial Estate Aayakar Bhavan, M.K. Road S.J. Marg, Lower Parel (W) Mumbai - 400020 Mumbai - 400013 Pan: Aafcb9355H (Appellant) (Respondent) Assessee Represented By : Shri Jayesh Dadiya Department Represented By : Shri Chetan M. Kacha

Section 142(1)Section 143(1)Section 143(2)

assessee and he analyzed the factual performance of the 15 M/s. Beetle Ventures Private Limited assessee subsequent to issue of shares. The valuation of shares are for that matter any valuation is itself is a projection of future events or activities and no doubt it has to be done with ... valuer and legislature in more than one place depends on the skills of the professionals like merchant banker only to value the valuation of shares or other volatile securities. Since, Ld. CIT(A) has compared the factuals with projections and assessee has achieved 40% of the actual results

Dy CIT CC-1(4), Mumbai vs. M/S Grasim Industries Ltd., Mumbai

ITA 41/MUM/2021[2018-19]Status: DisposedITAT Mumbai30 Nov 2022AY 2018-19

Bench: Shri Prashant Maharishi, Am & Shri Pavan Kumar Gadale, Jm

For Appellant: Shri. J.D Mistry, Sr. AdvFor Respondent: Shri Anil Singh

Section 115OSection 115QSection 2

failed to consider the market value of shares on the most proximate date which should be considered for the purpose of correct valuation of shares ignoring the judgment of Hon’ble Apex Court in the case of CIT Vs. Central India Industries Ltd. 82 ITR 555 (SC).” ITA Nos. 1935/MUM/2020 ... assessee deriving the value of each share at ₹ 39.51 per share, and also rejected the valuation by the assessing officer, he took valuation of shares allotted to PI opportunity fund by the assessee on 30/6/2017 on private placement basis which was invested on the basis of valuation report dated 29/6/2017

Grasim Industries Ltd., Mumbai vs. Dy CIT, Central Circle-1(4), Mumbai

ITA 1935/MUM/2020[2018-19]Status: DisposedITAT Mumbai30 Nov 2022AY 2018-19

Bench: Shri Prashant Maharishi, Am & Shri Pavan Kumar Gadale, Jm

For Appellant: Shri. J.D Mistry, Sr. AdvFor Respondent: Shri Anil Singh

Section 115OSection 115QSection 2

Jt Comm. of Income Tax (OSD) Central Circle-1(4), Mumbai vs. M/S Grasim Industries Limited (Successor to Aditya Birla Nuvo Lid), Mumbai

In the result, the appeal filed by the Revenue is dismissed

ITA 1295/MUM/2022[2013-14]Status: DisposedITAT Mumbai17 Nov 2022AY 2013-14

Bench: Shri Om Prakash Kant, Am & Ms. Kavitha Rajagopal, Jm Jt. Cit (Osd), M/S. Grasim Industries Limited Central Circle-1(4), (Successor To Aditya Birla Nuvo Ltd.) A-Wing, 2Nd Floor, Aditya Birla Centre, Mumbai Vs. S. K. Ahire Marg, Worli, Mumbai-400 030

For Respondent: Shri Kailash Kanojia

Section 143(3)Section 250Section 263Section 47

Grasim Industries Limited the source of evidences of SPV to acquire the shares of ABMWL, the valuation of shares of ABNL IT & ITES Limited and sale of shares on 14.03.2013 vide the ld. PCIT’s order dated 27.03.2019. The ld. AO passed the assessment order u/s.143(3) r.w.s

Zarco Realities Pvt. Ltd., Lower Parel vs. Commissioner of Income Tax (Appeals) - 48, Churchgate

ITA 923/MUM/2022[2008-2009]Status: DisposedITAT Mumbai31 Oct 2022AY 2008-2009

Bench: Shri Kuldip Singh & Shri Gagan Goyalassessment Year: 2008-09

For Appellant: NoneFor Respondent: Shri Satyapal Kumar, D.R

Section 143(3)Section 147Section 68

minimal which has created doubt whether there was deliberate rigging of market prices of shares. Hence, in the opinion of the AO, the valuation of shares for the purpose of share premium, which was primarily-based on the market value of share of M/s Emco

Asst CIT Cir. 15(1)(2), Mumbai vs. M/S Dpn Reality Deals Pvt Ltd., Navi Mumbai

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

ITA 1347/MUM/2020[2016-17]Status: DisposedITAT Mumbai31 Oct 2022AY 2016-17

Bench: Shri Aby T. Varkey, Jm & Shri Amarjit Singh, Vp आयकर अपील सं/ I.T.A. No.1347/Mum/2020 (निर्धारण वर्ा / Assessment Years: 2016-17) Acit, Circle-15(1)(2) बिधम/ M/S. Dpn Reality Deals Room No. 483A, 4Th Floor, Pvt. Ltd. Vs. Aayakar Bhavan, Mumbai- Unit No. 4, Building No. 400020. 2, Sector-1, Millenium Business Park Mahape, Navi Mumbai-400710. स्थधयी लेखध सं./जीआइआर सं./Pan/Gir No. : Aaacy6576C (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) Assessee By: Shri Saurabh Bhat Revenue By: Smt. Riddhi Mishra (Dr) सुनवाई की तारीख / Date Of Hearing: 19/10/2022 घोषणा की तारीख /Date Of Pronouncement: 31/10/2022 आदेश / O R D E R Per Aby T. Varkey, Jm: This Is An Appeal Preferred By The Revenue Against The Order Of The Ld. Commissioner Of Income Tax (Appeals) -24, Mumbai [Hereinafter Referred To As The “Cit(A)”] Dated 18.11.2019 For Ay. 2016-17. 2. The Grounds Of Appeal Of The Revenue Reads As Under: - “1. On The Facts & In The Circumstances Of The Case & In Law, The Ld. Cit(A) Has Erred In Allowing The Appeal & Deleting The Additions Of Rs.19,46,21,075/- Made U/S 56(2)(Viib) Of The Act. 2. The Appellant Prays That The Order Of The Ld. Cit(A) On The Above Ground Be Set Aside & That Of The Ao Be Restored.”

For Appellant: Shri Saurabh BhatFor Respondent: Smt. Riddhi Mishra (DR)

Section 56(2)(viib)

merits. 3 A.Y. 2016-17 DPN Reality Deals 4.3 During the course of assessment proceedings, the assessee company has submitted the certificate of valuation of share under rule 11UA. On perusal of the same, the following facts have been emerged out: 1. In its valuation report, the chartered accountant ... information supplied to us." Keeping in mind the above disclaimer and from the perusal of Valuation Report, it appears that the valuation of shares is not realistic keeping in view the growth and stature of the assessee company. Further, in the valuation report, the figures have been put up without

S.A. Metro Plots Pvt. Ltd., Chennai vs. ITO, Corporate Ward - 6 (1), Chennai

The appeal stands partly allowed for statistical purposes

ITA 1909/CHNY/2019[2015-16]Status: DisposedITAT Chennai19 Oct 2022AY 2015-16

Bench: Hon’Ble Shri Mahavir Singh & Hon’Ble Shri Manoj Kumar Aggarwal, Am

For Appellant: Shri G. Sivasubramanian (CA) – Ld. ARFor Respondent: Shri P. Sajit Kumar (JCIT) –Ld. DR

Section 142ASection 143(3)Section 56Section 56(2)(viib)

with hefty premium of Rs.1500/- per share. Accordingly. Ld. AO invoked the provisions of Sec.56(2)(viib) and directed assessee to justify the valuation of shares. 4.2 The assessee submitted that the premium was fixed before-hand in investor agreement dated 23.02.2012. The assessee also filed valuation report ... would have no application. 9. In the above background, we deem it fit to provide another opportunity to the assessee to justify the valuation of shares in terms of Sec.56(2)(viib). Accordingly, the matter stand restored back to the file of Ld. AO to provide another opportunity

M/S. Jds Ventures India Ltd, Mumbai vs. ITO 10 (2) (1), Mumbai

In the result, appeal filed by the assessee is allowed

ITA 1597/MUM/2021[2012-13]Status: DisposedITAT Mumbai17 Oct 2022AY 2012-13

Bench: Shri S. Rifaur Rahman, Hon'Ble & Ms Kavitha Rajagopal, Hon'Blem/S. Jds Ventures India Limited Income Tax Officer – 10(2)(1) V. Office No. 4, Bharat Photo House 5Th Floor, Aayakar Bhavan 547, Kalbadevi Road M.K. Road, Mumbai - 400020 Mumbai - 400002 Pan: Aaeca1485E Appellant Respondent Assessee Represented By : Shri N.R. Aggarwal Revenue Represented By : Ms. Vranda U. Matkari

Section 133(6)Section 143(1)Section 143(2)Section 143(3)Section 68

shares as on 31.03.2011 24000 Book value of each share of the assessee as on 3415/- 31.03.2011 ……… 4. Apart from above book Valuation of shares, Assessee had plans from 2012 to enter into manufacturing Industry, Particularly in Chemicals at GIDC Sarigam Tal. Umbergaon Dist Valsad, Gujrat for which finally agreement

ITO 1(2)(3), Mumbai vs. M Pallonji Enerprises P. Ltd, Mumbai

In the result, the appeal of the In the result, the appeal of the Revenue is dismissed whereas dismissed whereas cross objection of the assessee is allowed

ITA 1907/MUM/2017[2009-10]Status: DisposedITAT Mumbai13 Oct 2022AY 2009-10

Bench: Shri Amit Shukla () & Shri Om Prakash Kant () Assessment Year: 2009-10 Ito-1(2)(3), M/S M Pallonji Enterprises Pvt. Ltd., R. No. 527, 5Th Floor, Aayakar 46/A, Cawasji Patel Street, Fort, Bhavan, M.K. Road, Vs. Mumbai-400020. Mumbai-400020. Pan No. Aafcm 3357 A Appellant Respondent

For Appellant: Dr. K. Shivaram, Sr. Adv. &For Respondent: Mr. T. Shankar, CIT-DR

Section 68

well as for earlier years showed consistent losse as for earlier years showed consistent losses and hence the s and hence the valuation of shares was not justified?" valuation of shares was not justified?" 5. "Whether on the facts and circumstances of the case and in "Whether on the facts