Addition of Excess Share Premium: AO cannot change Method of Valuation of Shares, rules ITAT [Read Order]

The Bangalore bench of the Income Tax Appellate Tribunal (ITAT), while considering an appeal challenging the addition of excess share premium under section 68 of the Income Tax Act, 1961 has held that the Assessing Officer cannot change the method of valuation of shares when the assessee was following a different method of valuation.

The assessee company is engaged in the business of providing a platform to facilitate greater supply chain visibility and efficiency to all the players in road transportation industry. During the year under consideration, the assessee has issued 40,765 preference shares having a face value of Rs.10/- each at a price of Rs.3,158.39 per share. Out of the above, 22,431 shares were issued to a foreign company named M/s Accel India IV (Mauritius) Ltd and the remaining shares were issued to Indian residents. While concluding

By placing reliance on the decision rendered by Delhi bench of ITAT in the case of Agro Portfolio P Ltd (2018)(94 taxmann.com 112), the AO rejected DCF method and proceeded to determine the value of shares under NAV method.

Allowing the plea of the assessee, Accountant Member Mr. B R Bhaskaran and Judicial Member Mr. Beena Pillai held that both the additions, i.e., addition made u/s 56(2)(viib) of the Act and sec.68 of the Act relate to the share premium amount, i.e., both the additions arise out of common issue only.

Granting relief to the assessee, the Tribunal held that “the assessee has also filed certain additional evidences. We earlier noticed that the assessee had adopted DCF method for valuing the shares, while the AO has adopted NAV method. In view of the above said decision rendered by the co-ordinate bench, which in turn has followed the decision rendered by Hon’ble Bombay High Court in the case of Vodafone M-Pesa Ltd (supra), the AO is not entitled to change the method of valuation of shares.”

To Read the full text of the Order CLICK HERE

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