Tribunal held that, S. 56(2)(viib) shares that all types of shares are covered by this section. The argument of the assessee that RNCPS is a quasi-debt and that it was not the intention of the legislature to bring such instruments within the ambit of this section, is devoid of merit. There is no dispute on the method of valuation of these RNCPS. The valuer has adopted “discounted cash flow” method of valuation and the Assessing Officer has accepted the same. Considering the valuation report where the Valuer has considered 10% as discount factor where as the CIT(A) has considered at 12.5% rate of discount . The valuation adopted by the valuer was based on proper comparable and bench mark, the addition made under section 56(2)(viib), by the AO to the extent sustained by the CIT(A) was deleted. ( AY. 2013-14)
Microfirm Capital (P.) Ltd. v. DCIT (2018) 168 ITD 301/62 ITR(T) 109/192 TTJ 431// 164 DTR 35 (Kol) (Trib.)
S. 56 : Income from other sources – Redeemable non-cumulative preference shares (RNCPS) cannot be excluded from ambit of section 56(2)(viib)- In case of issue of redeemable non-cumulative preference shares (RNCPS) at premium, conclusion of valuer that 10 per cent discount factor was appropriate, was to be upheld as it was based on proper comparable for bench marking [ S.56(2)(viib), Rule 11UA(c)(c), ]