The Assessee Company issued certain shares to its holding company against a face value of Rs. 10 per share. It adopted the discount cash flow (DCF) method for the determination of fair market value (FMV) of shares as per the valuation report of the independent valuer. The AO held  that the FMV of shares determined as per the DCF method was without any sound factual basis and computed the fair market value of shares at Rs.11.54 per share by applying the NAV method and considering the difference between FMV as per DCF method qua NAV method a chargeable income of assessee u/s. 56(2)(viib) and added amount in assessee’s income. On appeal the Tribunal held that  S. 56(2)(viib) creates a legal fiction whereby the scope and ambit of expression ‘income’ has been enlarged to artificially tax a capital receipt earned by way of premium as a taxable revenue receipt. Hence deeming fiction ordinarily requires to be read to meet its purpose of taxing unaccounted money and thus needs to be seen in the context of peculiar facts. The legal fiction has been created for a definite purpose and its application need not be extended beyond the purpose for which it has been created. Bringing the premium received from the holding company to tax net under these deeming fictions would tantamount to stretching the provision to an illogical length and will lead to some kind of absurdity in taxing own money of shareholders without any corresponding benefit. Held that the action of AO was contrary to provisions of section 56(2)(viib) and therefore addition deleted.  (AY. 2016-17)