Case Number: ITA 5906/DEL/2019
Appellant: ACIT, Circle-8(1), New Delhi
Respondent: Etawah Chakeri (Kanpur) Highway Pvt. Ltd., New Delhi
Assessment Year: 2013-14
Order Type: Final Tribunal Order
Date of Order: 2023-09-12
Pronounced On: 2023-09-12
Case Filed On: 2019-07-08
This appeal, filed by the Revenue, is directed against the order dated 30th April, 2019 of the CIT(A)-34, New Delhi, relating to the Assessment Year 2013-14. The case pertains to the addition of Rs. 90 crores under section 56(2)(viib) read with section 2(24)(xvi) of the Income Tax Act, 1961, made by the Assessing Officer (AO) on the grounds of share valuation.
The solitary grievance of the Revenue is that the CIT(A) erred in deleting the addition of Rs. 90 crores made by the AO under section 56(2)(viib) read with section 2(24)(xvi) of the Income Tax Act.
Etawah Chakeri (Kanpur) Highway Pvt. Ltd. was incorporated on 15th December, 2011 and was awarded a Toll Road contract by NHAI for the construction of a six-lane Etawah-Chakeri, Kanpur, section of National Highway-2 in Uttar Pradesh. During the assessment year under consideration, the assessee allotted 1 crore shares of Rs. 10/- each at a premium of Rs. 90 per share to its parent companies, Oriental Structure Engineers Projects Ltd. and Oriental Tollways Ltd.
The AO noted that the assessee issued shares on 29th August, 2012, prior to the amendment of Rule 11UA, which introduced the DCF method for valuation. The AO computed the fair market value (FMV) of the shares using the NAV method, as per the rules prevailing on 1st April, 2012, and concluded that the FMV of the shares was Rs. 10/- per share. Consequently, the AO added the excess consideration of Rs. 90 crores as income under section 56(2)(viib).
The assessee challenged the assessment before the CIT(A), arguing that the valuation of shares at a premium of Rs. 90/- per share was supported by a valuation report from M/s M. Mehta & Co., Chartered Accountants, using the DCF method. The CIT(A) allowed the appeal, holding that the DCF method, although introduced later, was a recognized method of valuation and could not be discarded on technical grounds.
The case was heard by the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) on 4th September, 2023. The Tribunal consisted of Shri N.K. Billaiya, Accountant Member, and Shri Anubhav Sharma, Judicial Member. The Tribunal noted the following points:
The Tribunal upheld the CIT(A)’s decision, stating that valuation is a technical and complex problem that should be left to experts in the field. The Tribunal emphasized that the AO had not demonstrated any issues with the methodology adopted by the assessee and had merely rejected the valuation on technical grounds.
In conclusion, the ITAT dismissed the appeal filed by the Revenue, finding no error or infirmity in the CIT(A)’s order.
Order: The appeal of the Revenue is dismissed.
Pronounced on: 12th September, 2023
Accountant Member: N.K. Billaiya
Judicial Member: Anubhav Sharma
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asstt. Registrar, ITAT, New Delhi
ACIT, Circle-8(1), New Delhi vs Etawah Chakeri (Kanpur) Highway Pvt. Ltd. – Share Valuation Dispute
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