ACIT v. Anala Anjibabu. (2020) 185 ITD 1/193 DTR 377/207 TTJ 239 (Vishakha) (Trib.)

S. 56 : Income from other sources-Share premium-Method of valuation-Discounted cash flow method, or book value method-Choice is with assessee-Revenue cannot force assessee to adopt particular method for valuing fair market value of share. [S. 56(2)(viib), R.11UA(1)(c)(b), 11UA(2)(B)]

Assessee had issued 2,00,000 equity shares of face value of Rs.10 each at Rs.180 per share which included premium of Rs.170 per share. Assessee  has adopted the fair market value as per valuation in accordance with rule 11UA(2)(B) of the Rule. The AO  held that market value of shares was required to be determined as per rule 11UA(1)(c)(b).  Accordingly, he adopted fair market value of shares at Rs.49.22 per share and taxed excess receipt of Rs.130.78 (Rs.180 minus Rs.49.22) as income of assessee to be taxed under section 56(2)(viib) as income from other sources.  Tribunal held that it was prerogative of assessee to estimate fair market value of shares issued by it adopting one method out of two methods i.e. discounted cash flow method or book value method, and that revenue authorities could not force assessee to adopt particular method for valuing fair market value of share. Therefore no addition was to be made in hands of assessee under section 56(2)(viib) of the Act.