| Question And Answer | |
|---|---|
| Subject: | Can the Assessing Officer disregard the valuation report submitted by the Assessee as per Rule 11UA of Rules ? |
| Category: | Income-Tax |
| Querist: | Mundra |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | rule 11UA, shares, valuation |
| Date: | May 11, 2021 |
Assessee submitted valuation report as per Rule 11UA determining valuation of share at Rs.32/- per share. The Assessing Officer calculated Value of share as under:
Share Capital – A
Reserves & Surplus – B
A + B divided by number of shares (c). The value came to Rs.22. The Assessing Officer made addition of Rs.10 i.e., Rs.32- Rs.22 in the hands of the company on the number of shares allotted by the company u/s 56(2)(viib) of the Act. Please let us know whether the addition is justified. Any case law in support of the assessee. Please guide us how to proceed further.
Rule 11UA(2) pertains to valuation of unquoted equity share. The said provision begins with a Non-Obstante Clause, therefore it overrides sub-clause (b) and (c) of Rule 11UA(1).
Rule 11UA(2) provides 2 methods which the assessee can avail at its option. Therefore, the assessee at its option can either values shares as per Net Asset Value Method or prepare a valuation report by a Merchant Banker as per the Discounted Free Cash Flow method.
Reliance is placed on the decision of the Hon’ble ITAT – Jaipur Bench in the case of Rameshwaram Strong Glass (P.) Ltd. v. ITO [2018] 172 ITD 571 (Jaipur – Trib.) wherein it was observed that when law had specifically given an option to assessee to choose any of method of valuation of his choice and assessee exercised an option by choosing a particular method (DCF here), changing method or adopting a different method would be beyond powers of revenue authorities