ITO, W-5(3), Chandigarh V. M/s Fred Enterprises Pvt. Ltd., Chandigarh

ITA 1379/CHANDI/2018

• Counselvise Citation: [2020] 109 COUNSELVISE.COM (IT) 6793 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 06-11-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ROHIT JAIN
• Keywords: Depreciation; Fair market value; Valuation report; Capital receipt
• Section: 56; 15; 56(2); 195; 44AB; 13; 22; 20

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A CHANDIGARH , !' # $ % &' , '( BEFORE: SH. SANJAY GARG, JUDICIAL MEMBER & SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO. 1379/CHD/2018 / ASSESSMENT YEAR : 2015-16 THE ITO, WARD 5(3), CHANDIGARH. M/S FRED ENTERPRISES PVT. LTD., SCO 3688, SECTOR 46-C, CHANDIGARH. ./ PAN NO: AAACF5918R / APPELLANT / RESPONDENT ! / REVENUE BY : SHRI ROHIT JAIN, ADVOCATE '# ! / ASSESSEE BY : SMT. C. CHANDRAKANTA, CIT(DR) $ % #&/ DATE OF HEARING : 05/03/2020 '()* #&/ DATE OF PRONOUNCEMENT : 30/06/2020 ')/ ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APP EALS)-2 CHANDIGARH [HEREINAFTER REFERRED TO AS CIT(A) ] U/ S 250(6) OF THE INCOME TAX ACT, 1961 ( HEREINAFTER REFERRED TO AS 'ACT') DATED 29.08.2018,PERTAINING TO ASSESSMENT YEAR(A.Y) 2015- 16. 2. THE SOLITARY ISSUE IN THE PRESENT APPEAL RELATES TO ADDITION MADE OF SHARE PREMIUM RECEIVED BY THE ASSE SSEE AMOUNTING TO RS. 13,90,45,530/-,U/S 56(2)(VIIB) OF THE ACT, ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 2 OF 26 ON ACCOUNT OF THE SAME BEING EXCESS CONSIDERATIO N RECEIVED OVER AND ABOVE THE FAIR MARKET VALUE OF S HARES ISSUED, 3. BRIEF FACTS RELATING TO THE CASE ARE THAT DURING THE IMPUGNED A.Y I.E, 2015 -16, THE ASSESSEE COMPANY HA D ALLOTTED 2,35,667 EQUITY SHARES OF FACE VALUE OF RS 100 EACH AT A PREMIUM OF RS 590/- PER SHARE. DURING ASSESSME NT PROCEEDINGS THE ASSESSING OFFICER (AO) ASKED THE AS SESSEE TO PROVIDE THE VALUATION OF THE SHARES AS PER THE BOOK VALUE AND FAIR MARKET VALUE AS ON 31.03.2014 AND PROVIDE THE JUSTIFICATION FOR CHARGING THE EXORBITANT SHARE PRE MIUM IN TERMS OF SECTION 56(2)(VIIB). THE ASSESSEE CONTENTE D THAT THE SHARE APPLICATION MONEY HAD NOT BEEN RECEIVED IN TH E RELEVANT PREVIOUS YEAR AND THEREFORE THE PROVISIONS OF SECTION 56(2)(VIIB) WERE NOT APPLICABLE TO THE CASE OF THE ASSESSEE. THE AO WAS OF THE OPINION THAT AS PER THE COMPANY'S ACT, ANY AMOUNT RECEIVED AND HELD PURSUANT TO AN OFFER M ADE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, TOWARDS ANY SUBSCRIPTION TO ANY SECURITY INCLUDING SHARE APPLIC ATION MONEY OR ADVANCE TOWARDS ALLOCATION OF SECURITIES P ENDING ALLOTMENT, SO LONG AS SUCH AMOUNT IS APPROPRIATED O NLY AGAINST THE AMOUNT DUE ON ALLOTMENT OF SECURITIES A PPLIED FOR SHALL BE IN NATURE OF A DEPOSIT. THE AO NOTED THAT IT IS ONLY IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YE AR UNDER ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 3 OF 26 REFERENCE THAT THE ISSUE OF SHARES HAD TAKEN PLACE AND HENCE, THE CAUSE OF ACTION HAD ARISEN IN THE RELEVA NT PERIOD UNDER CONSIDERATION. THE AO STATED THAT THE EXPLAN ATION TO SECTION 56(2) (VII B) ALSO MANDATED THAT THE FAIR M ARKET VALUE OF SHARES SHALL BE THE VALUE ON THE DATE OF ISSUE O F SHARES. ACCORDINGLY, THE CONTENTION OF THE ASSESSEE WAS REJ ECTED AND THE FAIR MARKET VALUE, IN ACCORDANCE WITH RULE LL(U )(B) OF THE INCOME TAX RULES,1962, WAS WORKED OUT TO RS 7.92 PE R SHARE AND THE ASSESSEE WAS REQUIRED TO SHOW CAUSE WHY THE SHARE PREMIUM OF RS 13,90,95,530/-,REPRESENTING EXCESS CONSIDERATION OF THE ISSUE PRICE OF THE SHARES ABOV E THE FAIR MARKET VALUE OF THE SHARES, BE NOT TREATED AS THE I NCOME OF THE ASSESSEE FROM OTHER SOURCES BY INVOKING THE PRO VISIONS OF SECTION 56(2)(VIIB). THE ASSESSEE FURNISHED DETA ILED REPLY IN RESPONSE TO THE SHOW CAUSE NOTICE. BUT THE SAME WAS REJECTED BY THE AO. THE AO REJECTED THE VALUATION D ONE BY THE ASSESSEE GIVING DETAILED REASONING IN PARAS 5 OF HIS ORDER WHILE DOING SO AND HELD THAT THE PROVISIONS O F SECTION 56(2)(VIIB) WERE CLEARLY APPLICABLE TO THE ASSESSEE'S CASE. VALUATION WAS DONE IN ACCORDANCE WITH RULE 1L(U)(B) OF THE IT RULES AND THE SHARE PREMIUM OF RS 13,90,45,530/- REPRESENTING EXCESS CONSIDERATION OF THE ISSUE PRICE OF THE SHARES ABOVE THE FAIR MARKET VALUE OF THE SHARE WAS ADDED AS ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 4 OF 26 INCOME FROM OTHER SOURCES TO THE RETURNED INCOME OF THE ASSESSEE. 4. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD. CIT(A) WHERE DETAILED SUBMISSIONS WERE MADE BY THE ASSESSE E CHALLENGING THE ADDITION MADE ON THE GROUND THAT TH E SECTION 56(2)(VIIB) WAS INVOKED ON THE RECEIPT OF CONSIDERATION AGAINST ISSUE OF SHARES AND SINCE THE ASSESSEE HAD NOT RECEIVED AMOUNTS IN THE IMPUGNED YEAR BUT I N THE EARLIER YEARS, NO ADDITION COULD BE MADE UNDER THE RELEVANT SECTION. REFERENCE WAS MADE BOTH TO THE PROVISIONS OF THE SECTION AS WELL AS TO THE RULES FOR COMPUTING THE E XCESS SHARE PREMIUM RECEIVED AS PRESCRIBED UNDER THE INCO ME TAX RULES, 1962 I.E. RULE 11(U)(A) TO THE EFFECT THAT B OTH SECTION AND THE RULE WHEN READ TOGETHER, IT WAS EVIDENT THA T THE RECEIPT OF SHARE CAPITAL WAS THE TRIGGER FOR INVOKI NG THE PROVISIONS OF SECTION 56(2)(VIIB). THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER PASSED, AGREED WITH THE CONTENTION S OF THE ASSESSEE THAT THE SECTION WAS INVOKED IN THE YEAR O F RECEIPT OF CONSIDERATION AND SINCE IN THE PRESENT CASE, NO CONSIDERATION WAS RECEIVED IN THE IMPUGNED YEAR, TH E ADDITION MADE BY THE AO WAS HELD NOT SUSTAINABLE UN DER LAW. HE, ACCORDINGLY, DIRECTED DELETION OF THE ADDITION MADE. THE ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 5 OF 26 RELEVANT FINDING OF THE LD. CIT(A) AT PARA 7.3 OF H IS ORDER IS AS UNDER : 7.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED THE ASSESSMENT ORDER. THE MAIN CONTENTION I N THIS CASE IS WHETHER THE PROVISIONS OF SECTION 56(2 )(VIIB) ARE APPLICABLE IN THE IMPUGNED ASSESSMENT YEAR OR NOT. SECTION 56(2) (VIIB) OF THE ACT, INSERTED IN THE ST ATUTE BY THE FINANCE ACT, 2012 W.E.F. 01.04.2013, PROVIDES THAT IF A COMPANY IN WHICH PUBLIC IS NOT SUBSTANTIALLY INTERESTED, IS SUES SHARES AT PREMIUM TO ANY PERSON BEING A RESIDENT, THE EXCESS OF THE AGGREGATE CONSIDERATION RECEIVED FOR SUCH SHARES OV ER-THE FAIR MARKET VALUE THEREOF WOULD BE TAXABLE AS 'INCOME FR OM OTHER SOURCES '. THE AFORESAID CLAUSE (VIIB) TO SECTION 56(2) OF THE ACT IS REPRODUCED HEREUNDER FOR READY REFERENCE: INCOME FROM OTHER SOURCES. 56(1) INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLU DED FROM THE TOTAL INCOME UNDER THIS ACT SHALL BE CHARG EABLE TO INCOME-TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES', IF IT IS NOT CHARGEABLE TO INCOME-TAX UND ER ANY OF THE HEADS SPECIFIED IN SECTION 14, ITEMS A TO E. . 56(2) IN PARTICULAR, AND WITHOUT PREJUDICE TO THE GENERALITY OF THE PROVISIONS OF SUB-SECTION (I), TH E FOLLOWING INCOMES, SHALL BE CHARGEABLE TO INCOME, T AX UNDER THE HEAD 'INCOME FROM OTHER SOURCES' NAMELY : - .. (VIIB) WHERE A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, RECEIVES, IN A NY PREVIOUS YEAR, FROM ANY PERSON BEING A RESIDENT, AN Y CONSIDERATION FOR ISSUE OF SHARES THAT EXCEEDS THE FACE VALUE OF SUCH SHARES, THE AGGREGATE CONSIDERATION R ECEIVED FOR SUCH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES: PROVIDED THAT THIS CLAUSE SHALL NOT APPLY WHERE THE CONSIDERATION FOR ISSUE OF SHARES IS RECEIVED (I) BY A VENTURE CAPITAL UNDERTAKING FROM A VENTURE CAPITAL COMPANY OR A VENTURE CAPITAL FUND: OR (II) BY A COMPANY FRO M A CLASS OR CLASSES OF PERSONS AS MAY BE NOTIFIED BY THE CEN TRAL GOVERNMENT IN THIS BEHALF. EXPLANATION.- FOR THE PURPOSES OF THIS CLAUSE, (A) THE FAIR MARKET VALUE OF THE SHARES SHALL BE TH E VALUE ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 6 OF 26 (I) AS MAY BE DETERMINED IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED; OR (II) AS MAY BE SUBSTANTIATED BY THE COMPANY TO THE SATISFACTION OF THE ASSESSING OFFICER, BASED ON THE VALUE, ON THE DATE OF ISSUE OF SHARES, OF ITS ASSET S, INCLUDING INTANGIBLE ASSETS BEING GOODWILL, KNOW-HO W, PATENTS, COPYRIGHTS, TRADEMARKS, LICENCES, FRANCHIS ES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMIL AR NATURE, WHICHEVER IS HIGHER; (B) 'VENTURE CAPITAL COMPANY', 'VENTURE CAPITAL FUN D' AND 'VENTURE CAPITAL UNDERTAKING' SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN CLAUSE (A ), CLAUSE (B) AND CLAUSE (C) OF EXPLANATION 1 TO CLAUS E (2 3 FB) OF SECTION 10;' (EMPHASIS SUPPLIED) PERUSAL OF THE ABOVE SECTION CLEARLY SHOWS THAT THE FOLLOWING CONDITIONS ARE REQUIRED TO BE FULFILLED FOR THE APP LICATION OF THE PROVISIONS OF SECTION 56(2)(VIIB) OF THE ACT: A) THE COMPANY SHOULD RECEIVE IN ANY PREVIOUS YEAR; B) ANY CONSIDERATION WHICH EXCEEDS FAIR MARKET VALUE O F SHARES; C) AGAINST FRESH ISSUE OF SHARES. THUS ONE OF THE PRIMARY PERQUISITES FOR INVOKING PR OVISIONS OF SECTION 56(2)(VIIB) OF THE ACT IS THAT THE CONSIDER ATION AGAINST ISSUANCE OF SHARES SHOULD BE RECEIVED IN THE PREVIO US YEAR IN WHICH THE SECTION IS SOUGHT TO BE INVOKED. IT IS UNDISPUT ED THAT DURING THE RELEVANT PREVIOUS YEAR THE ASSESSEE HAD ONLY ISSUE/ ALLOTTED 235667 EQUITY SHARES OF RS 10 AT A PREMIUM OF RS. 5 90/- PER SHARE AGAINST THE SHARE APPLICATION MONEY RECEIVED IN FIN ANCIAL YEAR 2007-08, 2008-09, 2009-10 AND 2010-11. THUS, IN THI S CASE, THE CONSIDERATION WAS RECEIVED IN EARLIER YEARS AND NO CONSIDERATION HAS BEEN RECEIVED IN THE RELEVANT PREVIOUS YEAR. IN THE YEARS IN WHICH THE CONSIDERATION WAS RECEIVED BY THE ASSESSE E, THE PROVISIONS OF SECTION 56(2)(VIIB) WERE NOT APPLICAB LE. THE AO HAS NOTED IN THE ASSESSMENT ORDER THAT THAT AS PER THE COMPANY'S ACT, ANY AMOUNT RECEIVED AND HELD PURSUANT TO AN OFFER M ADE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT TOWARDS A NY SUBSCRIPTION TO ANY SECURITY INCLUDING SHARE APPLICATION MONEY O R ADVANCE TOWARDS ALLOCATION OF SECURITIES PENDING ALLOTMENT, SO LONG AS SUCH AMOUNT IS APPROPRIATED ONLY AGAINST THE AMOUNT DUE ON ALLOTMENT OF SECURITIES APPLIED FOR SHALL BE IN NATURE OF A D EPOSIT. IT IS ONLY IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER REFERENCE THAT THE ISSUE OF SHARES HAD TAKEN PLACE. HENCE, TH E CAUSE OF ACTION HAD ARISEN IN THE RELEVANT PERIOD UNDER CONSIDERATI ON. I AM UNABLE TO CONCEDE TO THIS REASONING OF THE AO. EVEN IF THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE IN THE EARLIER PREVI OUS YEARS IS CONSIDERED AS A DEPOSIT AS PER THE PROVISIONS OF TH E COMPANY ACT, THE SAME WILL NOT ALTER THE SITUATION IN ANY MANNER THAT THE ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 7 OF 26 CONSIDERATION WAS 'RECEIVED' IN THOSE YEARS. MORE OVER, NEITHER THE PROVISIONS OF THE ACT NOR THE COMPANIES ACT, 2013 L AY DOWN ANY RESTRICTIONS ON THE COMPANY QUA THE PRICE AT WHICH FRESH SHARES MAY BE ISSUED. IN OTHER WORDS, A COMPANY IS FREE TO PRICE THE FRESH ISSUE OF SHARES AT ANY VALUE. FURTHER, SHARE PREMIU M, BY ITS VERY NATURE, IS A CAPITAL RECEIPT AND IS NOT INCOME IN I TS ORDINARY SENSE AND IS THEREFORE, NOT ELIGIBLE TO TAX. IT IS ONLY A FTER THE AMENDMENT MADE IN SECTION 56(2) OF THE ACT, EFFECTIVE FROM AS SESSMENT YEAR 2013-14 ONWARDS, THAT SHARE PREMIUM IS MADE TAXABLE IN THE HANDS OF THE COMPANY ISSUING SHARES, SUBJECT TO CON DITIONS SPECIFIED THEREIN. THEREFORE, IF THE CONDITIONS SPE CIFIED IN CLAUSE (VIIB) TO SECTION 56(2) OF THE ACT ARE NOT BREACHED , THE DEEMING FICTION OF THE SAID SECTION WOULD NOT APPLY AND THE EXCESS SHARE PREMIUM COULD NOT BE TAXED IN THE HANDS OF THE ISSU ING COMPANY. THE FACT REMAINS THAT THE CONSIDERATION WAS RECEIVE D IN THE EARLIER YEARS IN WHICH THE PROVISION OF SECTION 56(2) (VIIB ) WERE NOT APPLICABLE AND NO CONSIDERATION WAS RECEIVED IN THE PREVIOUS YEAR 2014-15 RELEVANT FOR AY 2015-16 DURING WHICH THE PR OVISIONS OF SECTION 56(2)(VIIB) WERE APPLICABLE. THUS THE ADDIT ION MADE BY THE AO IS DELETED. SINCE THE ADDITION HAS BEEN DELETED ON THE GROUND THAT THE PROVISIONS OF SECTION 56(2)(VIIB) WERE NOT APPLICABLE TO THE ALLOTMENT OF SHARES BY THE ASSESSEE IN THE RELEVANT PREVIOUS YEAR, THE ISSUE OF VALUATION OF THESE SHARE AS PER RULE 11 (U) (B) IS NOT BEING ADJUDICATED UPON. THE GROUND OF APPEAL NO 2 I S ALLOWED. 5. AGGRIEVED BY THE SAME, THE REVENUE HAS COME UP I N APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS : (I) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A)'S ORDER IS NOT PERVERSE HAVING E RRED IN ALLOWING THE APPEAL OF THE ASSESSEE WITHOUT APPRECI ATING THE FACTS OF THE CASE ? (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) WAS RIGHT IN HOLDIN G THAT THE ADDITION UNDER SECTION 56(2)(VIIB) CAN BE MADE ONLY IF THE SHARE PREMIUM IS RECEIVED DURING THE YEAR, WHEREAS THE SE CTION 56(2)(VIIB) ONLY REFERS TO ISSUANCE OF SHARES STATI NG 'IF A COMPANY IN WHICH PUBLIC IS NOT SUBSTANTIALLY INTERE STED, ISSUES SHARES AT PREMIUM TO ANY PERSON BEING A RESIDENT'. (III) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS NOT ERRED IN LAW AND FACT IN DELETIN G THE ADDITION MADE ON ACCOUNT OF EXCESS PREMIUM RECEIVED ON ISSUA NCE OF SHARES WITHOUT APPRECIATING THE FACT THAT SHARES HA VE BEEN ISSUED AT EXCESSIVE PREMIUM IN TERMS OF SECTION 56( 2)(VIIB) OF THE ACT READ WITH RULE 11UA DURING THE F.Y. 2014-15 AND CAUSE OF ACTION HAS ARISEN IN THIS FINANCIAL YEAR AND NOT IN YEAR OF RECEIPT OF SHARE APPLICATION MONEY. ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 8 OF 26 (IV) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD CIT(A) HAS NOT ERRED IN LAW AND FACT I N HOLDING THAT CAUSE OF ACTION HAD ARISEN IN YEAR OF RECEIPT OF SH ARE APPLICATION MONEY WHEN AS PER COMPANY'S ACT ANY AMO UNT RECEIVED AND HELD PURSUANT TO AN OFFER MADE TOWARDS ANY SUBSCRIPTION TO ANY SECURITY INCLUDING SHARE APPLIC ATION MONEY OR ADVANCE TOWARDS ALLOCATION OF SECURITIES PENDING ALLOTMENT IS IN THE NATURE OF A DEPOSIT AND ISSUE OF SHARES WAS IN THIS FY. (V) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS RIGHT IN HOLDING THAT CON SIDERATION WAS RECEIVED IN THE EARLIER YEARS IN WHICH THE PROV ISIONS OF SECTION 56(2)(VIIB) WERE NOT APPLICABLE, WHEN THE P ROVISION OF SECTION 56(2)(VIIB) SPEAKS EXPLICITLY ONLY OF ISSUE OF SHARES AND PROVIDES THE METHOD FOR DETERMINING SHARE PREMIUM A S PRESCRIBED UNDER RULE 11UA AND DOES REFER TO SHARE APPLICATION MONEY WHICH WAS RECEIVED IN EARLIER YEARS. (VI) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CYT(A) HAS VIOLATED THE BASIC PRINCIPLE OF INTERPRETATION OF STATUTES WHICH REQUIRES THAT THE LANGUAGE OF THE ST ATUTE BE GIVEN ITS PLAIN AND UNAMBIGUOUS MEANING - ABSOLUTA NTANTIA EXPOSITORE NON INDIGENT - PLAIN WORDS NEED NO EXPOSITION AND WHEN SECTION REFERS TO ISSUE OF SHARES IT CANNOT BE INTERPRETED TO REFER TO RECEIPT OF SHARE APPLICATION MONEY. (VII) IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE SET AS IDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. (VIII) THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROU NDS OF APPEAL BEFORE THE APPEAL IS HEARD OR IS DISPOSED OF F. 6. BEFORE US, THE REVENUE HAS CHALLENGED THE ORDER OF THE LD. CIT(A) CONTENDING THAT A PLAIN READING OF THE S ECTION ALONGWITH THE RULES REVEALS THAT THE TRIGGER FOR TH E APPLICABILITY OF SECTION 56(2)(VIIB) OF THE ACT IS THE POINT OF TIME OF ISSUE OF SHARES AND NOT THE RECEIPT OF CONS IDERATION FOR THE SAME. THE LD. DR POINTED OUT THAT THE SECT ION PRESCRIBES THAT ON THE DATE OF ISSUE OF SHARES, THE FAIR MARKET VALUE OF THE SHARES IS TO BE DETERMINED AND COMPARED WITH THE ACTUAL PREMIUM RECEIVED AND IF THE PREMIUM IS IN ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 9 OF 26 EXCESS OF THE FAIR MARKET VALUE, THEN THE ADDITION IS TO BE MADE UNDER THE SECTION. HE FURTHER DREW OUR ATTENT ION TO THE RULES PRESCRIBED UNDER THE INCOME TAX RULES, 19 62 FOR THE DETERMINATION OF THE FAIR MARKET VALUE OF THE S HARES UNDER THE SECTION I.E. RULE 11(U)(A) ON THE VALUATI ON DATE I.E. THE DATE OF ISSUE OF SHARES. HE FURTHER CONTENDED THAT IF THE CONTENTION OF THE ASSESSEE THAT THE SECTION IS TRIG GERED ON THE RECEIPT OF CONSIDERATION FOR ISSUE OF SHARES, I S ACCEPTED, IT WOULD LEAD TO ABSURD RESULTS. THE LD. COUNSEL P OINTED OUT THAT IN SUCH CIRCUMSTANCES FOR THE APPLICABILITY OF THE SECTION, THE ISSUE OF SHARES AND THE RECEIPT OF CON SIDERATION BOTH WOULD HAVE TO TAKE PLACE IN THE SAME PREVIOUS YEAR. HE POINTED OUT THAT IF THE SHARE APPLICATION MONEY IS RECEIVED IN ONE YEAR BUT THE SHARES ARE NOT ISSUED IN THAT YEAR , NO ADDITION CAN BE MADE SINCE THE FAIR MARKET VALUE CA NNOT BE DETERMINED AND THE FAIR MARKET VALUE IS THE BASIS O F COMPARISON. HE FURTHER CONTENDED THAT IF THE SHARE APPLICATION MONEY IS RECEIVED IN SEVERAL PREVIOUS Y EARS, THEN THE QUESTION ARISES AS TO IN WHICH YEAR THE ADDITIO N IS TO BE MADE. HE CONTENDED THAT THE ONLY REASONABLE INTERP RETATION, THEREFORE, IS THAT THE SECTION IS TRIGGERED ON THE ISSUE OF SHARES AND NOT ON THE RECEIPT OF CONSIDERATION FOR THE SAME. HE FURTHER CONTENDED THAT EVEN AS PER THE COMPANIES ACT, ANY AMOUNT RECEIVED AS SHARE APPLICATION MONEY PEND ING ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 10 OF 26 ALLOTMENT IS NOT IN THE NATURE OF CONSIDERATION FOR THE ISSUE OF SHARES BUT IS TREATED AS A DEPOSIT AND IT IS ONL Y ON THE ACTUAL ALLOTMENT OF SHARES THAT THE SAID AMOUNT CHA NGES ITS CHARACTER AND IS TREATED AS CONSIDERATION FOR THE I SSUE OF SHARES. THE LD. DR IN SUPPORT OF HIS CONTENTION, R ELIED ON THE FOLLOWING DECISIONS : (I) INDIA TODAY ONLINE PVT. LTD. ITA NO 6453 /5454/DE/2 018 (II) M/S CIMEX LAND AND HOUSING PVT. LTD. ITA NO 5933/DE L/2018 7. A BRIEF SYNOPSIS OF THE ARGUMENTS MADE BY THE LD . DR WERE FILED BEFORE US WHICH ARE REPRODUCED HEREUNDER : 1. THE MAIN ISSUE IS WITH REGARD TO THE APPLICABILITY OF SECTION 56(2)(VIIB) GIVEN THE FACT THAT THE SHARE PREMIUM WAS NOT RECEI VED IN THE YEAR UNDER CONSIDERATION I.E F.Y 2014-15 BUT INSTEAD THE SHARE APPLICATION MONEY WAS RECEIVED IN F.Y 2007-08, 2008-09, 2009-10 AND 2 010-11. 2. IT IS THE STAND OF THE DEPARTMENT THAT THE TRIGGER FOR THE OPERATION OF THE SECTION IS NOT THE RECEIPT OF THE SHARE APPLICA TION MONEY BUT INFACT THE DATE OF ISSUE OF SHARES. THE SECTION PRESCRIBES THAT ON THE DATE OF THE ISSUE OF THE SHARES THE FAIR MARKET VALUE OF THE SH ARES IS TO BE DETERMINED AND THEN THE VALUE IS TO BE COMPARED WIT H THE SHARE PREMIUM RECEIVED AND IF THE SHARE PREMIUM IS IN EXC ESS OF THE FMV, THEN ADDITION IS TO BE MADE UNDER THE SECTION. 3. EXPLANATION TO SECTION 56(2)(VIIB) CLARIFIES HOW TH E FAIR MARKET VALUE IS TO BE COMPUTED EITHER ON THE BASES OF RULE 11U OR B ASED ON THE VALUE OF THE ASSETS OF THE COMPANY ON THE DATE OF THE ISSUE OF THE SHARES, WHICHEVER IS HIGHER. RULE 11U DEFINES BALANCE SHEET AS THAT DRAWN UP ON THE VALUATION DATE. RULE 11 UA PRESCRIBES THE MO DE OF DETERMINING FMV WITH REFERENCE TO THE VALUATION DATE. NECESSARI LY THIS POINTS TO THE FACT THAT THE FMV THAT IS THE POINT OF REFERENCE IS THE ONE CALCULATED ON THE VALUATION DATE I.E. THE DATE OF THE ISSUE OF THE SH ARES. HENCE THE APPLICABILITY OF THE SECTION HINGES ON THE DATE OF THE ISSUE OF SHARES REGARDLESS OF WHEN THE SHARE APPLICATION MONEY WAS RECEIVED. 4. THE ASSESSEES ARGUMENT THAT SINCE THE SHARE APPLICA TION MONEY WAS NOT RECEIVED IN THE YEAR UNDER CONSIDERATION, AND B ECAUSE IT WAS RECEIVED PRIOR TO THE COMING INTO EFFECT OF SECTION 56(2(VIIB) HENCE, THE ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 11 OF 26 PROVISION OF SECTION CANNOT HAVE RETROSPECTIVE APPL ICATION IS BASED ON A COMPLETE MISUNDERSTANDING OF THE PROVISION, FOR THE FOLLOWING REASONS. (I) SINCE THE CRUCIAL TRIGGER IS THE ISSUE OF SHARES WH ICH TOOK PLACE AFTER THE SECTION WAS INTRODUCED, THE QUESTIO N OF RETROSPECTIVE OPERATION OF THE SECTION DOES NOT ARI SE. (II) ACCORDING TO THE ASSESSE, THE POINT OF REFERENCE IS THE RECEIPT OF THE SHARE APPLICATION MONEY. IF WE TAKE THIS LOG IC TO ITS ULTIMATE CONCLUSION, THIS WOULD MEAN THAT THE SECTION CAN BE OPERATIVE IN ONLY THOSE CASES WHERE THE SHARE APPLICATION MONEY IS RECEIVED IN THE RELEVANT PREVIOUS YEAR AND THE ISSUE OF SHARES IS ALSO IN THE SAME PREVIOUS YEAR (DETERMINATION OF FMV). IF S HARE APPLICATION MONEY IS RECEIVED IN A YEAR BUT THE SHA RES ARE NOT ISSUED IN THAT YEAR THEN, ACCORDING TO THE ASSESSEE , NO ADDITION CAN BE MADE AS FMV HAS NOT BEEN DETERMINED AND CALCULATION OF FMV WE KNOW IS THE BASIS OF COMPARIS ON. OBVIOUSLY IT CANNOT BE THE INTENTION OF THE LEGISLATURE TO MA KE THE SECTION SO LIMITED IN ITS OPERATION TO RENDER I T PRACTICALLY REDUNDANT. (III) FURTHERMORE, WHAT WOULD HAPPEN IF THE SHARE APPLICA TION MONEY IS RECEIVED IN SEVERAL PREVIOUS YEARS AS IN T HE PRESENT CASE? SINCE ACCORDING TO THE ASSESSEE IT IS THE REC EIPT IN THE RELEVANT PREVIOUS YEAR WHICH IS THE BASIS OF ADDITI ON, THEN IN WHICH YEAR CAN THE ADDITION BE MADE, IF AT ALL? ON THE CONTRARY IT WOULD ONLY BE REASONABLE TO SAY THAT SINCE IN THOSE ASSESSMENT YEARS WHEN THE SHARE APPLICATION MONEY WAS RECEIVED THE SHARES WERE NOT ALLOTTED, THEREFORE THE SHARE PREMIUMS COU LD NOT HAVE BEEN EXAMINED BY THE ASSESSING OFFICER U/S 56(2)(VI IB) OF THE ACT. 5. ACCORDING TO THE COMPANIES ACT, ANY AMOUNT RECEIVED AS SHARE APPLICATION MONEY PENDING ALLOTMENT IS IN THE NATUR E OF A DEPOSIT. IT IS ONLY ON THE ACTUAL ISSUE OF SHARES THAT THE SITUATI ON CHANGES AND HENCE THE CAUSE OF ACTION IS THE ACTUAL ISSUE OF SHARES. (THIS IS DISCUSSED AT PAGE 3 OF THE ASSESSMENT ORDER) LD. COUNSEL FOR THE ASSESSEE ON THE HAND MADE SEVER AL ARGUMENTS IN SUPPORT OF ITS CONTENTION THAT THE CRI TICAL WORD FOR INVOKING THE SECTION WAS RECEIPT OF CONSIDERA TION FOR ISSUE OF SHARES AND THE SECTION ACCORDINGLY WAS TO BE INVOKED IN THE YEAR WHEN AMOUNTS WERE RECEIVED AGAI NST THE ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 12 OF 26 SHARES. BRIEFLY PUT THE LINE OF ARGUMENTS OF THE LD . COUNSEL FOR THE ASSESSEE IN THIS REGARD WAS AS UNDER: A- THAT THE SECTION WAS SPECIFICALLY INSERTED TO TAX RECEIPTS WHICH OTHERWISE WERE CAPITAL IN NATURE AN D THEREFORE IF THE CONDITIONS THEREIN WERE NOT BREA CHED, THE SECTION WOULD NOT APPLY. B- THAT AS PER THE READING OF SECTION 56(2)(VIIB) THE PRIMARY PRE REQUISITE FOR INVOKING THE SECTION WAS RECEIPT OF CONSIDERATION AGAINST ISSUE OF SHARES IN THE PREVIO US YEAR IN WHICH THE SECTION IS SOUGHT TO BE INVOKED. C- THAT EVEN AS PER THE RULES SPECIFIED FOR DETERMINI NG THE FAIR MARKET VALUE(FMV) OF SHARES ISSUED FOR DETERMI NING THE EXCESS RECEIPT ON ISSUE OF SHARES, I.E; RULE 11 U & 11UA OF THE RULES, THE VALUATION DATE FOR VALUING T HE SHARES HAS BEEN STATED TO BE THE DATE ON WHICH THE CONSIDERATION IS RECEIVED. D- THAT ACCORDINGLY SINCE THE ASSESSEE HAD RECEIVED AM OUNT AGAINST THE SHARES IN PRECEDING YEARS AND NOTHING H AD BEEN RECEIVED IN THE IMPUGNED YEARS THE SECTION COU LD NOT BE INVOKED IN THE IMPUGNED ASSESSMENT YEAR. E- THAT HAVING REGARD TO THE FACTS THAT THE SHARE APPLICATION MONEY WAS RECEIVED IN PRECEDING YEARS W HEN THE PROVISIONS OF SECTION 56(2)(VIIB) WAS NOT EVEN ON THE STATUTE,THE APPLICATION OF THE SAID SECTION IN THE YEAR UNDER CONSIDERATION WAS CLEARLY IMPERMISSIBLE IN LA W. THAT THE USE OF THE EXPRESSION IN ANY PREVIOUS YEA R FOLLOWED BY THE EXPRESSION OF CONSIDERATION REFER S TO THE YEAR IN WHICH THE CONSIDERATION IS RECEIVED BY THE COMPANY AND CANNOT BE TAKEN TO MEAN ANY PREVIOUS YE AR OTHER THAN THE YEAR OF THE RECEIPT OF THE CONSIDERA TION. F- THAT THE WORD RECEIPT MEANS TO BE GIVEN OR PRESENTE D WITH OR PAID SOMETHING AND REFERS TO THE FIRST OCCA SION WHEN THE RECIPIENT GETS THE MONEY UNDER HIS OWN CONTROL. RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF KESHAV MILLS LTD. VS. CIT [1953] 23 ITR 230 IN THIS REGARD. LD. COUNSEL FOR THE ASSESSEE FURTHER RELIED ON THE FOLLOWING DECISIONS OF THE ITAT IN SUPPORT OF THE I TS CONTENTION THAT THE PROVISIONS OF SECTION 56(2)(VII B) OF THE ACT INVOKED ONLY IN THE YEAR OF RECEIPT OF CONSIDER ATION. ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 13 OF 26 I. M/S LUXMI FOODGRAINS PVT. LTD. VS. ITO IN ITA NO. 316/CHD/2019 ORDER DT. 07/11/2019 (CHD TRIB) II. ACIT VS. M/S DIACH CHEMICALS & PIGMENTS PVT. LTD IN ITA NO. 546/KOL/2017 ORDER DT. 19/06/2019 (KOL TRIB) G)THAT ANY OTHER INTERPRETATION WOULD LEAD TO ABSUR D RESULT IN AS MUCH AS IT WOULD BE A SCENARIO MORE EV IL THAN A RETROSPECTIVE APPLICATION OF SECTION. SINCE IN CA SE OF RETROSPECTIVELY, APPLICATION OF SECTION INSERTED SU BSEQUENTLY IS APPLIED TO A TRANSACTION EFFECTED IN EARLIER YEARS. HOWEVER IN THE PRESENT CASE THE TRANSACTION TOOK PLACE IN AN EARLIER YEAR AND THE LAW ENACTED SUBSEQUENTLY IS SOUGHT TO BE AP PLIED THAT TOO IN LATER YEARS TO AN EARLIER TRANSACTION. THAT THE SAME WAS PATENTLY ERRONEOUS AND CONTRARY TO ALL CANONS OF INTERPRETATION. 8. WE HAVE HEARD BOTH THE PARTIES, CAREFULLY GONE T HROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DOCUMENTS AND CASE LAWS REFERRED TO BEFORE US. THE ISSUE BEFORE US RELATES TO THE INTERPRETATION O F THE PROVISIONS OF SECTION 56(2)(VIIB) OF THE ACT WHICH TREATS AS INCOME THE AMOUNT OF EXCESS CONSIDERATION RECEIVED ON ISSUE OF SHARES, IN EXCESS OF THE FAIR MARKET VALUE OF SHARES. THE CONTROVERSY IS RELATING TO THE POINT OF TIME OF TRIGGER OF THE SECTION, WHETHER ON THE RECEIPT OF AMOUNTS RELA TING TO THE SHARES PRIOR TO BEING ISSUED, I.E ON RECEIPT OF SHARE ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 14 OF 26 APPLICATION MONEY OR ON THE ISSUE OF SHARES, IN THE BACKDROP OF THE FACTS OF THE CASE THAT THE ASSESSEE HAD RECE IVED SHARE APPLICATION MONEY IN PRECEDING YEARS I.E A.Y 2007- 08 TO A.Y 2010-11 AGAINST WHICH IT ALLOTTED 2,35,667 SHARES I N THE IMPUGNED YEAR OF FACE VALUE RS.10 AT PREMIUM OF RS. 590/- .ADMITTEDLY THE AMOUNTS RECEIVED IN EARLIER YEARS HAD BEEN REFLECTED AS SHARE APPLICATION MONEY PENDING ALLOTM ENT AND WHEN SHARES WERE ALLOTTED/ISSUED AGAINST THEM IN T HE IMPUGNED YEAR THE SAID AMOUNTS WERE TREATED AS SHAR E CAPITAL AND THE PREMIUM THEREON, IN EXCESS OF ITS F ACE VALUE, RECOGNIZED . WHILE THE LD. COUNSEL FOR THE ASSESSEE HAS INTERPRETED THE PROVISIONS OF THE SECTION TO BE STA TING THAT THE SECTION IS INVOKED ON THE RECEIPT OF AMOUNTS RE LATING TO THE SHARES, WHICH IN THE PRESENT CASE IS THE PRECED ING YEARS ,THE REVENUE HAS OFFERED A CONTRARY INTERPRETATION THAT THE SECTION IS INVOKED ON ISSUE OF SHARES. BOTH THE PAR TIES HAVE ALSO REFERRED TO THE RULES PROVIDING THE MECHANISM FOR DETERMINING THE FAIR MARKET VALUE OF THE SHARES, I. E RULE 11U AND 11UA OF THE INCOME TAX RULES,1962 ( HEREINA FTER REFERRED TO AS RULES),TO STRENGTHEN THEIR ARGUMEN TS. TO ADJUDICATE THE ISSUE, THEREFORE IT IS THEREFORE RELEVANT TO REPRODUCE SECTION 56(2)(VIIB) AND RULE 11U AND 11U A OF THE RULES , PRESCRIBED FOR DETERMINING THE FAIR MARKET VALUE OF THE SHARES ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 15 OF 26 SECTION 56(2): IN PARTICULAR, AND WITHOUT PREJUDICE TO THE GENE RALITY OF THE PROVISIONS OF SUB-SECTION (1), THE FOLLOWING INCOMES, SHAL L BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD INCOME FROM OTHER SOURCES, NAMELY . . (VIIB) WHERE A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, RECEIVES, IN ANY PREVIOUS YEAR, FROM ANY PERSON BEING A RESIDE NT, ANY CONSIDERATION FOR ISSUE OF SHARES THAT EXCEEDS THE FACE VALUE OF SUCH SHARES, THE AGGREGAT E CONSIDERATION RECEIVED FOR SUCH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES: PROVIDED THAT THIS CLAUSE SHALL NOT APPLY WHERE THE CONSIDERATION FOR ISSUE OF SHARES IS RECEIVED (I) BY A VENTURE CAPITAL UNDERTAKING FROM A VENTURE CAPITAL COMPANY OR A VENTURE CAPITAL FUND; OR (II) BY A COMPANY FROM A CLASS OR CLASSES OF PERSONS AS MAY BE NO TIFIED BY THE CENTRAL GOVERNMENT IN THIS BEHALF. EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, (A) THE FAIR MARKET VALUE OF THE SHARES SHALL BE THE VALUE (I) AS MAY BE DETERMINED IN ACCORDANCE WITH SUCH METHOD AS MA Y BE PRESCRIBED 16 ; OR (II) AS MAY BE SUBSTANTIATED BY THE COMPANY TO THE SATISFACT ION OF THE ASSESSING OFFICER, BASED ON THE VALUE, ON THE DATE OF ISSUE OF SHARES, OF ITS ASSETS, INCLUDIN G INTANGIBLE ASSETS BEING GOODWILL, KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENCES, FRANC HISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE, WHICHEVER IS HIGHER; (B) VENTURE CAPITAL COMPANY, VENTURE CAPITAL FUND AND VENTU RE CAPITAL UNDERTAKING SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN CLAUSE (A), CLAUSE (B) AND CLAUSE (C) OF 17 [EXPLANATION] TO CLAUSE (23FB) OF SECTION 10 ;] THE RULES FOR DETERMINING THE FAIR MARKET VALUE OF SHARES FOR THE PURPOSE OF THE SECTION PRESCRIBED IN RULE 1 1U AND 11UA OF THE INCOME TAX RULES,1962 ARE REPRODUCED HEREUN DER : RULE 11U 11U. FOR THE PURPOSES OF THIS RULE AND RULE 11UA, [(A) ACCOUNTANT, (I) FOR THE PURPOSES OF SUB-RULE (2) OF RULE 11UA, MEANS A FELLOW OF THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA WITHIN THE MEANIN G OF THE CHARTERED ACCOUNTANTS ACT, 1949 (38 OF 1949) WHO IS NOT APPOI NTED BY THE COMPANY AS AN AUDITOR UNDER SECTION 44AB OF THE ACT OR UNDER S ECTION 224 OF THE COMPANIES ACT, 1956 (1 OF 1956); AND (II) IN ANY OT HER CASE, SHALL HAVE THE SAME MEANING AS ASSIGNED TO IT IN THE EXPLANATION B ELOW SUB-SECTION (2) OF SECTION 288 OF THE ACT; (B) BALANCE-SHEET, IN RELATION TO ANY COMPANY, ME ANS, (I) FOR THE PURPOSES OF SUB-RULE (2) OF RULE 11UA, THE BALANCE-SHEET OF SUCH COMPANY (INCLUDING THE NOTES ANNEXED THERETO A ND FORMING PART OF THE ACCOUNTS) AS DRAWN UP ON THE VALUATION DATE WHI CH HAS BEEN AUDITED BY THE AUDITOR OF THE COMPANY APPOINTED UND ER SECTION 224 OF THE COMPANIES ACT, 1956 (1 OF 1956) AND WHERE THE B ALANCE-SHEET ON THE VALUATION DATE IS NOT DRAWN UP, THE BALANCE-SHE ET (INCLUDING THE ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 16 OF 26 NOTES ANNEXED THERETO AND FORMING PART OF THE ACCOU NTS) DRAWN UP AS ON A DATE IMMEDIATELY PRECEDING THE VALUATION DATE WHICH HAS BEEN APPROVED AND ADOPTED IN THE ANNUAL GENERAL MEETING OF THE SHAREHOLDERS OF THE COMPANY; AND (II) IN ANY OTHER CASE, THE BALANCE-SHEET OF SUCH C OMPANY (INCLUDING THE NOTES ANNEXED THERETO AND FORMING PART OF THE ACCOU NTS) AS DRAWN UP ON THE VALUATION DATE WHICH HAS BEEN AUDITED BY THE AUDITOR APPOINTED UNDER SECTION 224 OF THE COMPANIES ACT, 1956 (1 OF 1956);] (C) MERCHANT BANKER MEANS CATEGORY I MERCHANT BAN KER REGISTERED WITH SECURITIES AND EXCHANGE BOARD OF INDIA ESTABLISHED UNDER SECTION 3 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (1 5 OF 1992); (D) QUOTED SHARES OR SECURITIES IN RELATION TO SH ARE OR SECURITIES MEANS A SHARE OR SECURITY QUOTED ON ANY RECOGNIZED STOCK EX CHANGE WITH REGULARITY FROM TIME TO TIME, WHERE THE QUOTATIONS OF SUCH SHA RES OR SECURITIES ARE BASED ON CURRENT TRANSACTION MADE IN THE ORDINARY COURSE OF BUSINESS; (E) RECOGNIZED STOCK EXCHANGE SHALL HAVE THE SAME MEANING AS ASSIGNED TO IT IN CLAUSE (F) OF SECTION 2 5 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956); (F) REGISTERED DEALER MEANS A DEALER WHO IS REGIS TERED UNDER CENTRAL SALES TAX ACT, 1956 OR GENERAL SALES TAX LAW FOR THE TIME BEING IN FORCE IN ANY STATE INCLUDING VALUE ADDED TAX LAWS; (G) REGISTERED VALUER SHALL HAVE THE SAME MEANING AS ASSIGNED TO IT IN SECTION 34AB OF THE WEALTH-TAX ACT, 1957 (27 OF 195 7) READ WITH RULE 8A OF WEALTH-TAX RULES, 1957; (H) SECURITIES SHALL HAVE THE SAME MEANING AS ASS IGNED TO IT IN CLAUSE (H) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956); (I) UNQUOTED SHARES AND SECURITIES, IN RELATION T O SHARES OR SECURITIES, MEANS SHARES AND SECURITIES WHICH IS NOT A QUOTED SHARES OR SECURITIES; (J) VALUATION DATE MEANS THE DATE ON WHICH THE PR OPERTY OR CONSIDERATION, AS THE CASE MAY BE, IS RECEIVED BY THE ASSESSEE.] RULE 11 UA 11UA. [ (1) ] FOR THE PURPOSES OF SECTION 56 OF THE ACT, THE FAI R MARKET VALUE OF A PROPERTY, OTHER THAN IMMOVABLE PROPERTY, SHALL BE D ETERMINED IN THE FOLLOWING MANNER, NAMELY, ( A ) VALUATION OF JEWELLERY, ( I ) THE FAIR MARKET VALUE OF JEWELLERY SHALL BE ESTIMAT ED TO BE THE PRICE WHICH SUCH JEWELLERY WOULD FETCH IF SOLD IN THE OPEN MARK ET ON THE VALUATION DATE; ( II ) IN CASE THE JEWELLERY IS RECEIVED BY THE WAY OF PUR CHASE ON THE VALUATION DATE, FROM A REG ISTERED DEALER, THE INVOICE VALUE OF THE JEWELLERY SHALL BE THE ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 17 OF 26 FAIR MARKET VALUE; ( III ) IN CASE THE JEWELLERY IS RECEIVED BY ANY OTHER MODE AND THE VALUE OF THE JEWELLERY EXCEEDS RUPEES FIFTY THOUSAND, THEN ASSES SEE MAY OBTAIN THE REPORT OF REGISTERED VALUER IN RESPECT OF THE PRICE IT WOULD FETCH IF SO LD IN THE OPEN MARKET ON THE VALUATION DATE; ( B ) VALUATION OF ARCHAEOLOGICAL COLLECTIONS, DRAWINGS, PAINTINGS, SCULPTURES OR ANY WORK OF ART, ( I ) THE FAIR MARKET VALUE OF ARCHAEOLOGICAL COLLECT IONS, DRAWINGS, PAINTINGS, SCULPTURES OR ANY WORK OF ART (HEREINAFTER REFERRED AS ARTISTIC WORK) SHALL BE ESTIMATED TO BE PRICE WHICH IT WOULD FETCH IF SOLD IN THE OPEN MARKET ON THE VALUATION DATE; ( II ) IN CASE THE ARTISTIC WORK IS RECEIVED BY THE WAY OF PURCHASE ON THE VALUATION DATE, FROM A REGISTERED DEALER, THE INVOICE VALUE O F THE ARTISTIC WORK SHALL BE THE FAIR MARKET VALUE; ( III ) IN CASE THE ARTISTIC WORK IS RECEIVED BY ANY OTHER MODE AND THE VALUE OF THE ARTISTIC WORK EXCEEDS RUPEES FIFTY T HOUSAND, THEN ASSESSEE MAY OBTAIN THE REPORT OF REGISTERED VALUER IN RESPECT OF THE PRICE IT WOULD FETCH IF SOLD IN THE OPEN MARKET ON THE VALUATION DATE; ( C ) VALUATION OF SHARES AND SECURITIES, ( A ) THE FAIR MARKET VALUE OF QUOTED SHARES AND SEC URITIES SHALL BE DETERMINED IN THE FOLLOWING MANNER, NAMELY, ( I ) IF THE QUOTED SHARES AND SECURITIES ARE RECEIVED BY WAY OF TRANSACTION CARRIED OUT THROUGH ANY RECOGNIZED STOC K EXCHANGE, THE FAIR MARKET VALUE OF SUCH SHARES AND SECURITIES SHA LL BE TH E TRANSACTION VALUE AS RECORDED IN SUCH STOCK EXCHANG E; ( II ) IF SUCH QUOTED SHARES AND SECURITIES ARE RECEIVED B Y WAY OF TRANSACTION CARRIED OUT OTHER THAN THROUGH ANY RECO GNIZED STOCK EXCHANGE, THE FAIR MARKET VALUE OF SUCH SHARES AND SECURITIES SHALL BE, ( A ) THE LOWEST PRICE OF SUCH SHARES AND SECURITIES QUOT ED ON ANY RECOGNIZED STOCK EXCHANGE ON THE VALUATION DATE, AN D ( B ) THE LOWEST PRICE OF SUCH SHARES AND SECURITIES ON A NY RECOGNIZED STOCK EXCHANGE ON A DATE IMMEDIATELY PRECEDING THE VAL UATION DATE WHEN SUCH SHARES AND SECURITIES WERE TRADED ON SUCH STOCK EXCHANGE, IN C ASES WHERE ON THE VALUATION DATE THERE IS NO TRADING IN SUCH SHARES AND SECURITIES ON ANY RECOGNIZED STOCK EXCHA NGE; (B) THE FAIR MARKET VALUE OF UNQUOTED EQUITY SHARES SHALL BE THE VALUE, ON THE VALUATION DATE, OF SUCH UNQUOTED EQUITY SHARES AS D ETERMINED IN THE FOLLOWING MANNER, NAMELY: THE FAIR MARKET VALUE OF UNQUOTED EQUITY SHARES =(A +B+C+D - L) (PV)/(PE), WHERE, A= BOOK VALUE OF ALL THE ASSETS (OTHER THAN JEWELLERY, ARTISTIC WORK, SHARES, SECURITIES AND IMMOVABLE PROPERTY) IN THE BALANCE-S HEET AS REDUCED BY, ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 18 OF 26 (I) ANY AMOUNT OF INCOME-TAX PAID, IF ANY, LESS THE AMO UNT OF INCOME- TAX REFUND CLAIMED, IF ANY; AND (II) ANY AMOUNT SHOWN AS ASSET INCLUDING THE UNAMORTISED AMOUNT OF DEFERRED EXPENDITURE WHICH DOES NOT REPRESENT THE V ALUE OF ANY ASSET; B = THE PRICE WHICH THE JEWELLERY AND ARTISTIC WORK WOULD FETCH IF SOLD IN THE OPEN MARKET ON THE BASIS OF THE VALUATION REPORT OB TAINED FROM A REGISTERED VALUER; C = FAIR MARKET VALUE OF SHARES AND SECURITIES AS D ETERMINED IN THE MANNER PROVIDED IN THIS RULE; D = THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY ANY AUTHORITY OF THE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF THE IMMOVABLE PROPERTY; L= BOOK VALUE OF LIABILITIES SHOWN IN THE BALANCE S HEET, BUT NOT INCLUDING THE FOLLOWING AMOUNTS, NAMELY: (I) THE PAID-UP CAPITAL IN RESPECT OF EQUITY SHARES; (II) THE AMOUNT SET APART FOR PAYMENT OF DIVIDENDS ON PR EFERENCE SHARES AND EQUITY SHARES WHERE SUCH DIVIDENDS HAVE NOT BEE N DECLARED BEFORE THE DATE OF TRANSFER AT A GENERAL BODY MEETI NG OF THE COMPANY; (III) RESERVES AND SURPLUS, BY WHATEVER NAME CALLED, EVEN IF THE RESULTING FIGURE IS NEGATIVE, OTHER THAN THOSE SE T APART TOWARDS DEPRECIATION; (IV) ANY AMOUNT REPRESENTING PROVISION FOR TAXATION, OTH ER THAN AMOUNT OF INCOME-TAX PAID, IF ANY, LESS THE AMOUNT OF INCO ME- TAX CLAIMED AS REFUND, IF ANY, TO THE EXTENT OF THE EXCESS OVER TH E TAX PAYABLE WITH REFERENCE TO THE BOOK PROFITS IN ACCORDANCE WITH THE LAW APPLICA BLE THERETO; (V) ANY AMOUNT REPRESENTING PROVISIONS MADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILITIES; (VI) ANY AMOUNT REPRESENTING CONTINGENT LIABILITIES OTHE R THAN ARREARS OF DIVIDENDS PAYABLE IN RESPECT OF CUMULATIVE PREFEREN CE SHARES; PV= THE PAID UP VALUE OF SUCH EQUITY SHARES; PE = TOTAL AMOUNT OF PAID UP EQUITY SHARE CAPITAL A S SHOWN IN THE BALANCE- SHEET; ( C ) THE FAIR MARKET VALUE OF UNQUOTED SHARES AND SECURI TIES O THER THAN EQUITY SHARES IN A COMPANY WHICH ARE NOT LISTED IN ANY RECOGNIZED STOC K EXCHANGE SHALL BE ESTIMATED TO BE PRICE IT WOULD FETCH IF SOLD IN THE OPEN MARKET ON THE VALUATION DATE AND THE ASSESSEE MAY OBTAIN A REPORT FROM A MERCHANT BANKER OR AN ACCO UNTANT IN RESPECT OF WHICH SUCH VALUATION. (2) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-CLAUS E ( B ) OF CLAUSE ( C ) OF SUB-RULE (1), THE FAIR MARKET VALUE OF UNQUOTED EQUITY SHARES FOR THE PURPOSES OF SUB-CLAUSE ( I ) OF CLAUSE ( A ) OF EXPLANATION TO CLAUSE ( VIIB ) OF SUB-SECTION (2) OF SECTION 56 SHALL BE THE VAL UE, ON THE VALUATION DATE, OF SUCH UNQUOTED EQUITY SHARES AS D ETERMINED IN THE FOLLOWING MANNER UNDER CLAUSE ( A ) OR CLAUSE ( B ), AT THE OPTION OF THE ASSESSEE, NAMELY: ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 19 OF 26 (A) THE FAIR MARKET VALUE OF UNQUOTED EQUITY SHARES = (A L) (PV), (PE) WHERE, A = BOOK VALUE OF THE ASSETS IN THE BALANCE-SHEET AS RE DUCED BY ANY AMOUNT OF TAX PAID AS DEDUCTION OR COLLECTION AT SOURCE OR AS ADVANCE TAX PAYMENT AS REDUCED BY THE AMOUNT OF TAX CLAIMED AS REFUND UNDER THE INCOME-TA X ACT AND ANY AMOUNT SHOWN IN THE BALANCE-SHEET AS ASSET INCLUDING THE UNAMORT ISED AMOUNT OF DEFERRED EXPENDITURE WHICH DOES NOT REPRESENT THE VALUE OF A NY ASSET; L = BOOK VALUE OF LIABILITIES SHOWN IN THE BALANCE-SHEE T, BUT NOT INCLUDING THE FOLLOWING AMOUNTS, NAMELY: ( I ) THE PAID-UP CAPITAL IN RESPECT OF EQUITY SHARES; ( II ) THE AMOUNT SET APART FOR PAYMENT OF DIVIDENDS ON PR EFERENCE SHARES AND EQUITY SHARES WHERE SUCH DIVIDENDS HAVE NOT BEEN DE CLARED BEFORE THE DATE OF TRANSFER AT A GENERAL BODY MEETING OF THE COMPANY; ( III ) RESERVES AND SURPLUS, BY WHATEVER NAME CALLED, EVEN IF THE RESULTING FIGURE IS NEGATIVE, OTHER THAN THOSE SET APART TOWARDS DEPREC IATION; ( IV ) ANY AMOUNT REPRESENTING PROVISION FOR TAXATION, OTH ER THAN AMOUNT OF TAX PAID AS DEDUCTION OR COLLECTION AT SOURCE OR AS ADV ANCE TAX PAYMENT AS REDUCED BY THE AMOUNT OF TAX CLAIMED AS REFUND UNDE R THE INCOME- TAX ACT, TO THE EXTENT OF THE EXCESS OVER THE TAX PAYABLE WITH REFERENCE TO THE BOOK PROFITS IN ACCOR DANCE WITH THE LAW APPLICABLE THERETO; ( V ) ANY AMOUNT REPRESENTING PROVISIONS MADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILITIES; ( VI ) ANY AMOUNT REPRESENTING CONTINGENT LIABILITIES OTHE R THAN ARREARS OF DIVIDENDS PAYABLE IN RESPECT OF CUMULATIVE PREFEREN CE SHARES; PE = TOTAL AMOUNT OF PAID UP EQUITY SHARE CAPITAL AS SHO WN IN THE BALANCE-SHEET; PV = THE PAID UP VALUE OF SUCH EQUITY SHARES; OR ( B ) THE FAIR MARKET VALUE OF THE UNQUOTED EQUITY SHARES DETERMINED BY A MERCHANT BANKER OR AN ACCOUNTANT AS PER THE DISCOUNTED FREE CASH FL OW METHOD. 9. A BARE READING OF THE SECTION 56(2)(VIIB) , REVE ALS THAT WHAT IS SOUGHT TO BE SUBJECTED TO TAX UNDER IT IS THE EXCESS CONSIDERATION RECEIVED DURING THE YEAR FOR ISSUE O F SHARES (EMPHASIS SUPPLIED BY US),OVER AND ABOVE THE FAIR MARKET VALUE OF SHARES. ALL THE HIGHLIGHTED WORDS, WHICH HAVE BEEN USED IN THE SECTION, HAVE TO BE READ TOG ETHER AND NOT IN ISOLATION. WHAT IS NECESSARY THEREFORE AND P RIMARY FOR ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 20 OF 26 INVOKING THE SECTION IN A PARTICULAR ASSESSMENT YEA R IS THERE BEING RECEIPT DURING THE YEAR, OF/IN THE NATURE OF CONSIDERATION FOR THE ISSUE OF SHARES. CONSIDERATION, AS IS COMMON KNOWLEDGE IS THE PRICE THAT A PROMISEE IN A CONTRACT AGREES TO PAY TO A PROMISOR. IT IS THE BENEFIT THAT EACH PARTY GETS FROM A CONTRACTUAL DEA L. THEREFORE CONSIDERATION ARISES ONLY ON ENTERING INT O A CONTRACT. TO UNDERSTAND WHEN CONSIDERATION ARISES I N A CONTRACT INVOLVING ISSUE OF SHARES, IT IS NECESSARY TO UNDERSTAND THE PROCEDURE FOR ISSUE OF SHARES. AS IS EVIDENT FROM THE ASSESSMENT ORDER, PAGE 12,THE AO HAD NOTED THAT OFFER LETTERS HAD BEEN RECEIVED FROM PARTIES IN PRE CEDING YEARS ,APPLYING FOR SHARES IN THE ASSESSEE COMPANY OF FACE VALUE RS. 10/- AT PREMIUM OF RS.90/-. CONFIRMATIONS OF THE CONCERNED PARTIES STATING SO IS REPRODUCED AT PAGE 13-15 OF THE ASSESSMENT ORDER. IN THE IMPUGNED YEAR THE ASSE SSEE ISSUED SHARES AGAINST THESE OFFERS/APPLICATION AT A PREMIUM OF RS.590/- .THUS IT APPEARS THAT THOUGH THE INITI AL OFFER FOR SUBSCRIPTION IN SHARES BY THE INVESTORS WAS AT A PR EMIUM OF RS.90/- IT WAS ULTIMATELY AGREED AT PREMIUM OF RS.5 90/- AND SHARES ISSUED IN RESPONSE TO THE OFFER ACCORDINGLY BY THE ASSESSEE COMPANY. IT IS AT THIS POINT OF TIME, WHEN THE OFFER OF THE SUBSCRIBERS IS ACCEPTED BY THE COMPANY BY WA Y OF ALLOTTING SHARES TO THEM, THAT THE CONTRACT FOR IS SUE OF ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 21 OF 26 SHARES IS ENTERED INTO, AND THE PRICE PROMISED TO B E PAID UNDER THE CONTRACT BY THE INVESTOR IS THE CONSIDERA TION FOR ISSUE OF SHARES BY THE COMPANY. IT IS AT THIS JUNCT URE, WHEN THE CONTRACT IS ENTERED, THAT CONSIDERATION ARISES. PRIOR TO IT ANY AMOUNT PAID CANNOT BE TERMED AS CONSIDERATION. ALL/ANY AMOUNT PAID UNTIL THEN IS ONLY IN THE NATURE OF A DEPOSIT/SECURITY ALONGWITH THE PROPOSAL FOR SUBSCRI BING TO THE SHARES OF THE COMPANY. THIS DEPOSIT, ON BEING A DJUSTED AGAINST THE PRICE OF THE SHARES WHEN ISSUED, CHANGE S ITS CHARACTER AND BECOMES CONSIDERATION FOR THE ISSUE O F SHARES AND AT THIS POINT ,CONSIDERATION CAN BE SAID TO B E RECEIVED AGAINST ISSUE OF SHARES. IN SHORT, ON THE ISSUE OR ALLOTMENT OF SHARES BY A COMPANY WHEN CONSIDERATION ARISES, ALL DEPOSITS OR SHARE AP PLICATION MONEY RECEIVED EARLIER TAKE THE COLOUR OF CONSIDERA TION AND THIS CONVERSION IS TO BE TREATED AS RECEIPT OF C ONSIDERATION ON THE ISSUE OF SHARES. IT IS AT THIS POINT THAT AL L THE CONDITIONS OF SECTION 56(2)(VIIB) CAN BE SAID TO BE FULFILLED SO AS TO INVOKE THE SAME. THUS THE TRIGGER FOR INVOKIN G SECTION 56(2)(VIIB) OF THE ACT IS THE ISSUE OF SHARES. THIS IS FURTHER EVIDENT FROM THE EXPLANATION(A) TO SECTION 56(2)(VIIB) , WHICH EXPLAINS THE TERM FAIR MARKET V ALUE, FOR DETERMINING THE EXCESS CONSIDERATION RECEIVED OVER AND ABOVE IT, WHICH IS SUBJECTED TO TAX UNDER THE SECTION. TH E ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 22 OF 26 EXPLANATION STATES THE FMV OF THE SHARES TO BE THE VALUE DETERMINED AS PER METHOD PRESCRIBED(SUB CLAUSE(I) O R THE VALUE SUBSTANTIATED BY THE COMPANY TO THE SATISFACT ION OF THE AO BASED ON THE VALUE ON THE DATE OF ISSUE OF SHARES OF ITS ASSETS INCLUDING INTANGIBLE ASSETS, GOODWILL, KNOW- HOW, PATENT, COPY RIGHT, TRADE MARK, FRANCHISE OR OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. THUS AS PER CLAUSE (II) OF THE EXPLANATION TO THE S ECTION, THE FMV OF THE SHARES, IS THE VALUE ON THE DATE OF I SSUE OF SHARES. THEREFORE THE SECTION CAN BE TRIGGERED OR INVOKED ONLY IN THE YEAR OF ISSUE OF SHARES . THE RULES PRESCRIBED FOR DETERMINING THE FAIR MARKE T VALUE OF THE SHARES ALSO MAKES SENSE AND ARE WORKABLE ONL Y ON APPLYING THIS INTERPRETATION .THE RULES PRESCRIBED ARE RULE 11U AND 11UA ,BOTH OF WHICH ARE REPRODUCED ABOVE. R ULE 11UA(2) SPECIFICALLY DEALS WITH THE VALUATION OF FA IR MARKET VALUE OF UNQUOTED SHARES FOR THE PURPOSES OF SECTI ON 56(2)(VIIB) OF THE ACT, WHICH IS RELEVANT FOR THE P RESENT CASE. THE SAID RULE SPEAKS OF THE FAIR MARKET VALUE OF TH E SHARES AS BEING THE VALUE DETERMINED IN THE MANNER PRESCRI BED THEREIN ON THE VALUATION DATE (EMPHASIS SUPPLIED BY US). VALUATION DATE IN TURN HAS BEEN DEFINED IN RULE 11U (J) AS THE DATE ON WHICH THE CONSIDERATION IS RECEIVED. ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 23 OF 26 11. ON INTERPRETING THE TERM CONSIDERATION RECEIVED AS BEING AT THE TIME OF ISSUE OF SHARES AS HELD BY US ABOVE, THE VALUATION DATE FOR DETERMINING FMV IS THE DATE OF I SSUE OF SHARES. THUS A COMPARISON OF THE FAIR MARKET VALUE OF SHARES AND THE CONSIDERATION RECEIVED, BOTH RELATIN G TO THE ISSUE OF SHARES IS MADE AND THE SURPLUS IF ANY IS SUBJECTED TO TAX. THIS IS A REASONABLY SOUND AND LOGICAL INTE RPRETATION SINCE THE SECTION, SUBJECTS TO TAX THE EXCESS CONSI DERATION RECEIVED BY OVER PRICING THE VALUE OF SHARES ISSUE D. OVERPRICING OR EXCESS CONSIDERATION CAN BE DETERMIN ED WHEN THE ACTUAL PRICE AND THE MARKET PRICE RELATING TO I SSUE OF SHARES IS COMPARED. IF THE TRIGGER FOR THE INVOCATI ON OF THE SECTION IS IN THE YEAR OF RECEIPT OF AMOUNTS RELATI NG TO SHARES PRIOR TO THEIR BEING ISSUED, THE EXCESS CONSIDERATI ON RECEIVED ABOVE THE FMV OF SHARES CANNOT BE DETERMINED BECAUS E, SINCE THE SHARES HAVE NOT BEEN ISSUED, THERE CANNOT BE FMV OF ANYTHING WHICH IS NOT EVEN IN EXISTENCE. 12. WE, THEREFORE, AGREE WITH THE CONTENTION OF THE LD. DR THAT THE PROVISIONS OF SECTION 56(2)(VIIB) ARE TRIG GERED IN THE YEAR THE SHARES ARE ISSUED. 13. THE ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESS EE ARE ALL BASED ON LAYING EMPHASIS SOLELY ON THE WORD RE CEIVED USED IN THE SECTION ,WHICH HOLD NO GROUND SINCE AS WE HAVE ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 24 OF 26 HELD ABOVE THE WORDS USED IN THE SECTION ARE NOT TO BE READ IN ISOLATION AND THE CORRECT INTERPRETATION LIES IN THE MEANING OF THE PHRASE CONSIDERATION RECEIVED ON IS SUE OF SHARES, WHICH WE HAVE HELD RELATES TO THE YEAR OF ISSUE OF SHARES AND NOT BEFORE. AS FOR THE RELIANCE PLACED BY THE LD. CIT(A) ON THE DECISION OF THE KOLKATA BENCH OF THE ITAT IN THE CASE OF DIACH CHEMICALS AND PIGMENTS(SUPRA),WE FIND THAT THE SAME IS DISTIN GUISHABLE ON FACTS SINCE IN THE FACTS OF THE SAID CASE THE SH ARES WERE FOUND TO HAVE BEEN APPLIED FOR IN EARLIER YEAR AS P ER TERMS AND CONDITIONS SETTLED IN THAT YEAR AND ACCORDINGLY IT WAS HELD THAT THE PROVISIONS OF SECTION 56(2)(VIIB) WER E INVOKED IN THAT YEAR AND NOT IN THE YEAR OF ALLOTMENT OF SHA RES.IN THE CASE BEFORE US THE TERMS AND CONDITIONS OF ISSUE OF SHARES WERE NOT SETTLED IN THE YEAR OF APPLICATION FOR SHA RES BUT ON THE CONTRARY IN THE YEAR OF ALLOTMENT SINCE WHILE T HE APPLICATION HAD BEEN MADE AT A PREMIUM OF RS.90/- T HE SHARES WERE ALLOTTED IN THE IMPUGNED YEAR AT A PREM IUM OF RS.590/-. THE SAID DECISION THEREFORE IS OF NO ASSI STANCE TO THE ASSESSEE. THE DECISION OF THE ITAT CHANDIGARH BENCH IN THE CA SE OF LUXMI FOODGRAINS(SUPRA) IS ALSO DISTINGUISHABLE ON FACTS SINCE IN THAT CASE THE DISPUTE ABOUT THE INVOCATIO N OF SECTION 56(2)(VIIB) AROSE ON ACCOUNT OF THE FACT TH AT THE ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 25 OF 26 CONSIDERATION RECEIVED BY WAY OF CHEQUES HAD NOT BE EN ENCHASED BY THE ASSESSEE AT ALL AND THEREFORE HE DI SPUTED THE APPLICABILITY OF THE SECTION ON THE GROUND OF R ECEIPT OF CONSIDERATION .THERE WAS NO DISPUTE ABOUT CONSIDERA TION HAVING ARISEN IN THAT CASE ,WHICH DISTINGUISHES IT FROM THE PRESENT CASE. THUS, READING THE PROVISIONS OF THE SECTION AND TH E RULES PRESCRIBED FOR DETERMINING THE FAIR MARKET VALUE OF SHARES, WHAT IS ARRIVED IS THAT THE PROVISIONS OF SECTION 5 6(2)(VIIB) ARE TRIGGERED IN THE YEAR OF ISSUE/ALLOTMENT OF SHA RES. IN THE PRESENT CASE, SINCE THE SHARES WERE ISSUED I N THE IMPUGNED YEAR, THE PROVISIONS OF SECTION, WE HOLD, HAVE BEEN RIGHTLY APPLIED BY THE AO IN THE IMPUGNED YEAR AND THE ORDER OF THE AO TO THAT EXTENT IS UPHELD. FURTHER SINCE THE LD.CIT(A) ALLOWED THE ASSESSES AP PEAL ON THIS GROUND ALONE AND DID NOT THEREFORE ADJUDICATE THE ISSUE OF DETERMINATION OF FAIR MARKET VALUE OF THE SHARES ISSUED, THE CIT(A) IS DIRECTED TO ADJUDICATE THIS ASPECT. 14. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED . ORDER COULD NOT BE PRONOUNCED EARLIER DUE TO NON- FUNCTIONING OF THE BENCH ON ACCOUNT OF CURFEW / LOC KDOWN IN THE WAKE OF COVID-19 PANDEMIC. ORDER PRONOUNCED ON 30 TH JUNE,2020. ITA -1379/CHD/2018 A.Y. 2015-16 PAGE 26 OF 26 SD/- SD/- ( ) ( # $ % &' ) (SANJAY GARG) (ANNAPURNA GUP TA) / JUDICIAL MEMBER '( / ACCOUNTANT MEMBER POONAM (+ #,- .-# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. $ /# / CIT 4. $ /# ( )/ THE CIT(A) 5. -01 #2 , & 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7% / GUARD FILE (+ $ / BY ORDER, 8 / ASSISTANT REGISTRAR