The assessee issued shares at premium and determined the fair market value (FMV) of unquoted equity shares on the basis of a valuation report adopting the Discounted Cash Flow (DCF) method as prescribed under Rule 11UA(2)(b). The Assessing Officer rejected the valuation mainly on the ground that the report contained disclaimers and determined a negative value under an alternative computation. The Tribunal held that the assessee had duly substantiated the FMV through an expert valuation report valuing shares at Rs. 2,771.65 per share and that general disclaimers commonly forming part of valuation reports could not be a ground for rejection in absence of any material defect in data or methodology. The High Court held that Explanation to section 56(2)(viib) permits adoption of a prescribed method or a value substantiated to the satisfaction of the Assessing Officer and once the assessee substantiates a higher valuation, the same is required to be accepted. The DCF method being one of the recognised methods under Rule 11UA, valuation of investment in subsidiary shares on that basis was permissible and no substantial question of law arises. (AY. 2016-17)