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“DCF method”

Special Rate ProvisionsRule 11UARule 11UA318 judgments

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

Leading authorities on DCF method

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.

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.

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.

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.

Agro Portfolio (P.) Ltd. v. ITO
94 Taxmann.com 112 · 2018 · High Court
33
citing judgments

The Assessing Officer (AO) has the power to disturb the valuation of shares provided by the assessee's chartered accountant, even if Rule 11UA(2) is followed. If the AO doubts the valuation report, they are not necessarily bound to refer the matter to the Valuation Officer and can adopt a different method to determine the fair market value.

Cinestaan Entertainment (P) Ltd. v. ITO
106 Taxmann.com 300 · 2019 · High Court
28
citing judgments

An Assessing Officer must accept the fair market value of shares determined by the assessee using a prescribed method like DCF or NAV, and cannot substitute their own valuation, as Section 56(2)(viib) is a deeming provision not open to broad interpretation.

Agro Portfolio Pvt. Ltd. v. ITO
171 ITD 74 · 2018 · ITAT
27
citing judgments

The Assessing Officer can scrutinize the valuation report submitted by an assessee and may, if necessary, determine a fresh valuation using the Discounted Cash Flow (DCF) method, even if the assessee opted for a different method, provided the assessee fails to substantiate their projections.

Pr. Commissioner of Income Tax-2 v. Enrich Agro Food Products Pvt. Ltd.
148 Taxmann.com 26 · 2023 · High Court
20
citing judgments

The Delhi High Court confirms that when shares are issued at a premium to investors, the valuation of such shares must be assessed based on established methods like the NAV or DCF method, and the revenue cannot arbitrarily determine the fair market value.

Judgments citing DCF method

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

protective basis by rejecting the valuation report furnished under Rule 11UA (2) (b) of the Income Tax Rules i.e. Discounted Cash Flow Method (DCF Method). The Ld. Counsel for the assessee submitted that the CIT(A) has committed an error in not accepting the valuation report of Chartered Accountant ... Rules. Further submitted that, when legislature provided an option to be exercised by the assessee to reach the value of the each share under DCF Method, the Lower Authorities ought to have accepted the same. The Ld. Assessee's Representative also relied on the judgment of the Gujrat High Court

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

protective basis by rejecting the valuation report furnished under Rule 11UA (2) (b) of the Income Tax Rules i.e. Discounted Cash Flow Method (DCF Method). The Ld. Counsel for the assessee submitted that the CIT(A) has committed an error in not accepting the valuation report of Chartered Accountant ... Rules. Further submitted that, when legislature provided an option to be exercised by the assessee to reach the value of the each share under DCF Method, the Lower Authorities ought to have accepted the same. The Ld. Assessee's Representative also relied on the judgment of the Gujrat High Court

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)

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 ‘Nil’ income for the Assessment Year 2015-16, the case of the assessee ... 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 submitted that any Company buying share/CCCPS from a foreign entity has to obtain permission

Quick Technologies Pvt. Ltd., New Delhi vs. ACIT, Circle-20(2), New Delhi

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

ITA 7353/DEL/2019[2016-17]Status: DisposedITAT Delhi15 Jun 2023AY 2016-17

Bench: Shri Saktijit Dey & Shri N.K. Billaiya

For Appellant: Shri Gautam Jain, AdvFor Respondent: Shri Vivek Vardhan, Sr. DR
Section 131Section 56(2)(vii)

support, the assessee submitted a copy of Valuation report issued by Sarvam and Associates. On perusal of the valuation report on the basis of DCF method, the AO noticed the following: A.Y 2016-17 A.Y 2017-18 A.Y 2018-19 Projected as per 3.65 Cr 4.74 Cr 6.17 Cr valuation ... share premium has been valued by an approved valuer, as per the relevant provisions of the Act, who valued the fair market value on DCF method, which is a recognized method and the Assessing Officer /CITA has not pointed out any defect or error in the said method

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)

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 projections and also disregarding that such action tantamount to 'impossibility of the performance' to use actual results, were ... 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 and also disregarding that such action tantamount to 'impossibility of the performance' to use actual results which were

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

this transaction in the first place. The TPO has determined the value by NAV method and determined the adjustment. The DRP has taken the DCF method and determined the adjustment. The assessee has claimed that the value was determined by a registered valuer which should be accepted. The assessee took ... weighted average of the value from NAV and the DCF method during TP and DRP proceedings. The Ld.DR further contended that the assessee has claimed that the revaluation reserve must be not taken into account while calculating the value of the shares. However, the DRP has taken the DCF method

ITO Ward -3(1), New Delhi vs. Appealing Infrastructure Pvt Ltd, New Delhi

In the result, the appeal of the Revenue is dismissed

ITA 1958/DEL/2019[2015-16]Status: DisposedITAT Delhi23 May 2023AY 2015-16

Bench: Dr. B. R. R. Kumarsh. Yogesh Kumar Usita No. 1958/Del/2019 : Asstt. Year : 2015-16 Income Tax Officer, Vs M/S Appealing Infrastructure Pvt. Ltd. 921A, 9Th Floor, Devika Tower, Ward-3(1), New Delhi-110002 Nehru Place, New Delhi-110019 (Appellant) (Respondent) Pan No. Aaica8767B

For Appellant: Sh. V. K. Agarwal, AR &For Respondent: Sh. P. Praveen Sidharth, CIT DR
Section 42Section 56(2)(viib)Section 57(2)(viib)

Discounted Free Cash Flow method.” 16. From the above, it is evident that Rule 11UA(2) prescribes two methods - Book Value method and DCF method. However, the said rule also provides that the method to be adopted is left to the choice of the assessee. The AO can refuse

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)

details filed shows that book value as per balance sheet has negative value per share whereas the value of shares as per DCF method was shown at Rs. 97/- per share. A report of valuation was submitted by the assessee during assessment proceedings. Perusal of the report indicates that certain ... details available on record shows that book value as per balance sheet has negative value per share whereas the value of shares as per DCF method was shown at Rs. 97/- per share. A report of valuation was submitted by the assessee during assessment proceedings. The relevant part

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)

report. The AO held that according to the Valuer, if the projections are not achieved, the basis of valuation shall lose its sanctity as DCF method. 4 Gamma Pizzakraft (Overseas) Pvt. Ltd. 9. The A.O. show-caused the assessee on 22.11.2018 which reads as under: “CA Neeraj Wadhawan, VP Finance ... Sapphire Foods India Pvt. Ltd. @ 65.65 per share of Rs.10/- face value and received Rs.55.65 as premium. Assessee has followed and relied on DCF method and valuation was done by CA Sh. Ashok Kumar Verma. In this regard Valuer CA Sh. Ashok Kumar Verma was summoned and his statement

DCIT Circle-20(1), New Delhi vs. Process Nine Technologies (P) Ltd, New Delhi

In the result, this appeal of the Revenue stands dismissed

ITA 9310/DEL/2019[2016-17]Status: DisposedITAT Delhi02 May 2023AY 2016-17

Bench: Shri Shamim Yahya & Shri Challa Nagendra Prasad[Assessment Year: 2016-17]

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

resident persons) as valuation report is in respect of equity shares and not preference share and to provide comparable data of amounts considered in DCF method and actual figures for As 2016-17, 2017-18 and 2018-19. 3.1. In reply thereto it was submitted on behalf of the assessee ... company that the fair market value was arrived at by applying the Discounted Cash Flow (DCF) method as per the valuation report furnished by M/s Ashwani & Associates, Chartered Accountants on the basis of the projections furnished by the assessee company. It was further submitted that the projections were made

DCIT, Circle- 10(1), New Delhi vs. Global Fairs & Media Pvt. Ltd., Delhi

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

ITA 4317/DEL/2017[2012-13]Status: DisposedITAT Delhi29 Mar 2023AY 2012-13

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

For Appellant: Shri KVSR Krishnan, AdvFor Respondent: Shri Anuj Garg, Sr. DR
Section 47

Assessing Officer noticed that the assessee company has valued goodwill on Discounted Cash Flow Method [DCF] but there is no mistake in adopting the DCF method but the figures adopted for free cash flow are imaginary when compared to the actual figures of cash flow upto

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)

share. The assessee company submitted valuation report of Chartered Accountant for determining fair market value per share at Rs.22.21/- adopting discounted cash flow (DCF) Method. The Assessing Officer disputed the fair market value determined on the basis of DCF Method which methodology is predominantly based on projected growth ... valuation report. The Assessing Officer discarded the FMV of Rs.22.21 per share determined in the valuation report of CA by applying DCF method holding the same to be devoid of substance. The Assessing Officer invoked NAV method as provided in Rule 11UA of the Income Tax Rules for the purposes

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)

from an independent valuer in terms of Rule 11UA, wherein, the valuer determined the fair market value of the shares adopting Discounted Cash Flow (DCF) method. Assessing Officer, however, did not accept the valuation. He observed that, in the valuation report the future projection of cash flow estimated for subsequent ... valuer and as per said valuation report, the sale price of the shares is as per the market value of the shares applying the DCF method. On a reading of section 56(2)(viib), it is observed that any consideration received for issue of shares which exceeds the fair

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

shares. It is the contention of the Ld. AR that the valuation of the shares have been done as per Discounted Cash Flow Method (DCF Method) which is prescribed under Rule 11UA (2) (b) of Income Tax Rules which has been certified by the Assessee’s qualified Charted Accountant ... 27/05/2019, it is held that the Assessing Officer cannot examined or substitute its own value in place of valuation arrived by the assessee either DCF Method or NAV Method, the commercial expediency has to be seen from the point view of businessman. Further held that if law provides the assessee

Asst CIT 11(3)(2), Mumbai vs. Zoeteis India Ltd, Mumbai

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

ITA 3285/MUM/2015[2010-11]Status: DisposedITAT Mumbai28 Dec 2022AY 2010-11
Section 50C

transfer of leasehold rights in land and building (b) Addition to long term capital gain by adopting sale consideration under NAV method as against DCF method adopted by the assessee. 2. The facts relating to the case are stated in brief. The assessee company is engaged in the business

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)

ought to have been 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 ... events relating to the value of shares. 9. The DRP erred in the following, whilst determining the valuation of the shares as per the DCF method: (a) considering the actual profits instead of projected profits; ITA. No. 2195/Mum/2014 Assessment Year: 2009-10 (b) considering the terminal growth rate

Crown Chemicals Pvt Ltd., Navi Mumbai vs. ACIT 15 (1)(2), Mumbai

In the result, appeal of the assessee is allowed

ITA 7876/MUM/2019[2015-16]Status: DisposedITAT Mumbai23 Dec 2022AY 2015-16
Section 143(1)Section 143(3)Section 56(2)(viib)

even near to the actual cash flow for financial years 2015-16 and 2016-17 and accordingly, concluded that the share valuation report using DCF method is not reliable and hence, rejected the same. The variance brought out by the ld. AO on the net cash flow between projections ... Projected Actual Projected Actual Cash Flow 50.70 -18.06 4242.14 3.1 All figures in Rs.lacs 3.2. The value per share determined using DCF method by the independent valuer was Rs.9,600/- per share. The workings of the DCF method of share valuation is reproduced in page 7 of the assessment order

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

Resurgent India, a third party valuation expert. As per the valuation report, the values of shares have been determined using income method (DCF Method) and Market Method (Comparable Companies Method). In valuation 50% weightage was assigned to both the methods. 11. Here-in-below, we are narrating the submissions ... without discussing the approach being) adopted for determining such ALP under both the approaches as explained below: Revised valuation under Income approach (DCF Method) The learned TRO considered the revised working of valuation submitted by the Assessee. However, the learned TPO eliminated the sale value of the Assistance division. Accordingly

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)

Sec.56 (2)(viib) were invoked to bring to tax excess share premium received by the assessee. 2.2 The assessee relied on discounted cash flow (DCF) method to arrive at valuation of shares which was held to be not accurate since forecasting future performance was difficult. The Ld. AO also found ... assessee assailed the additions on the ground that it had an option to choose any of the methods to value the shares. The DCF method was one of the prescribed methods. The valuation of Rs.74/- per share as done by Ld. AO was even less than the face value

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)

Sec.56 (2)(viib) were invoked to bring to tax excess share premium received by the assessee. 2.2 The assessee relied on discounted cash flow (DCF) method to arrive at valuation of shares which was held to be not accurate since forecasting future performance was difficult. The Ld. AO also found ... assessee assailed the additions on the ground that it had an option to choose any of the methods to value the shares. The DCF method was one of the prescribed methods. The valuation of Rs.74/- per share as done by Ld. AO was even less than the face value