The assessee has the option under Rule 11UA(2) to determine the FMV by either the ‘DCF Method’ or the ‘NAV Method’. The AO has no jurisdiction to tinker with the valuation and to substitute his own value or to reject the valuation. He also cannot question the commercial wisdom of the assessee and its investors. The ‘DCF Method’ is based on projections. The AO cannot fault the valuation on the basis that the real figures don’t support the projections. Also, the fact that independent investors have invested in the start-up proves that the FMV as determined by the assessee is proper. (ITA. No.8113/DEL/2018, dt. 27.05.2019)(AY.2015-16)
Cinestaan Entertainment P. Ltd. v. ITO ( 2019) 200 TTJ 459/ 180 DTR 65/ 177 ITD 809 (Delhi)(Trib.), www.itatonline.orgEditorial , Affirmed in PCIT v. Cinestaan Entertainment Pvt. Ltd. (2021) 433 ITR 82/ 199 DTR 345/ 320 CTR 381 (Delhi) (HC)
S. 56 : Income from other sources–Valuation-start-up-Assessee has the option under Rule 11UA(2) to determine the FMV by either the ‘DCF Method’ or the ‘NAV Method’-The AO has no jurisdiction to tinker with the valuation and to substitute his own value or to reject the valuation. [S. 56(2)(viib),,R.11UA(2)]