S. 56 : Income from other sources-Share premium-Valuation under DCF method-AO cannot substitute or reject valuation done by a prescribed valuer without authority-Projection variations with actuals cannot be a ground to disregard valuation-Deletion of addition justified. [S. 56(2)(viib), 11UA(2)(b)]
The assessee issued shares at a premium of ₹10 per share based on a Chartered Accountant’s valuation using the DCF method as prescribed under Rule 11UA(2)(b). The AO rejected the valuation citing unrealistic projections and absence of tangible assets, and added the premium to income u/s 56(2)(viib). The CIT(A) noted that in AY 2018–19, the same valuer’s report was accepted by the department and deleted the addition. The Tribunal, following Cinestaan Entertainment (P.) Ltd. v. ITO [2019] 106 taxmann.com 300 (Delhi)(Trib) affirmed in PCIT v. Cinestaan Entertainment (P.) Ltd.[2021] 433 ITR [2021] 433 ITR 82 (Delhi)(HC), held that where a recognised method prescribed in law is adopted by a qualified valuer, the AO cannot substitute his own valuation or reject it merely because projections differ from actual results. Variations are inherent in DCF valuation, which is based on reasonable estimates. Deletion of addition upheld. (AYs 2016–17, 2017–18) (ITA Nos. 3083–3084/Mum/2025, dt. 11-8-2025 )
DCIT v. Max Hospitals and Allied Services Ltd., (Mum)(Trib), www.itatonline.org

S. 32 : Depreciation-Intangible asset-Non-refundable deposit for rights to operate and manage hospital-Eligible for depreciation – Depreciation allowed in earlier years cannot be denied in subsequent years. [S. 32(1)((ii)]
The assessee paid a non-refundable deposit of ₹25 crores to acquire rights to operate and manage Nanavati Hospital and claimed depreciation treating the payment as an intangible asset u/s. 32(1)(ii). The AO disallowed the claim. The CIT(A) found depreciation had been allowed in earlier years on WDV and deleted the disallowance. The Tribunal upheld the CIT(A), relying on Bangalore International Airport Ltd. v. DCIT [2023] 457 ITR 229 (Kar)(HC), holding that such rights are intangible assets eligible for depreciation. Once allowed in earlier years, depreciation cannot be denied in subsequent years unless facts change. (AYs 2016–17 to 2018–19) (ITA Nos. 3083–3085/Mum/2025, dt. 11-8-2025)
DCIT v. Max Hospitals and Allied Services Ltd., (Mum.)(Trib.) www.itatonline.org
[Coram : Hon’ble Shri Saktijit Dey, VP and Hon’ble Shri Narendra Kumar Billaiya, AM]