Rockland Diagnostics Services P.Ltd, New Delhi V. ITO, Ward-21(3), New Delhi

ITA 316/DEL/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 2809 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2015-2016
• Appeal Filed On: 17-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ATIGU AHMED
• Keywords: Fair market value; Valuation report
• Section: 56; 143(1); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F: NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE, SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.316/DEL/2019 (ASSESSMENT YEAR 2015-16) ROCKLAND DIAGNOSTICS SERVICES PVT. LTD., B-33 & 34, QUTUB INSTITUTIONAL ARE, DELHI-110 017. PANAAGCR 7840C VS. INCOME TAX OFFICER, WARD-21(3), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY SH. K.M. GUPTA, ADV. SH. ROHIT TIWARI, ADV. RESPONDENT BY SH. ATIGU AHMED, SR. DR DATE OF HEARING 01.12.2020 DATE OF PRONOUNCEMENT 25.02.2021 ORDER PER SUDHANSHU SRIVASTAVA, JM: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST OR DER DATED 27.11.2018 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-7, NEW DELHI {CIT (A)} FOR ASSESSMEN T YEAR 2015-16. 2 ITA NO.316/DEL/2019 ROCKLAND DIAGNOSTICS SERVICES P VT. LTD. VS. ITO 2.0 THE BRIEF FACTS OF THE CASE ARE THAT TH E ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF SETTING UP, OPERATING AND MANAGING DIAGNOSTIC CENTERS AND CLINICAL PATHOLOGY TESTING S ERVICES, ETC. THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR WA S FILED DECLARING INCOME AT RS. NIL. THE RETURN WAS INITIALL Y PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CAL LED THE ACT) AND WAS LATER SELECTED UNDER THE LIMITED SCRUTINY TO EXA MINE LARGE SHARE PREMIUM RECEIVED DURING THE YEAR. (VERIFYING APPLICABILITY OF SECTION 56(2)(VIIB)). THE ASSESSMENT WAS COMPLETED A T AN INCOME OF RS.1,11,91,703/- AFTER MAKING ADDITION OF RS.1,07,8 2,453/- U/S 56(2)(B)(VIIB) OF THE ACT AND MAKING ANOTHER DISALL OWANCE OF RS.4,09,250/- ON ACCOUNT OF DISALLOWANCE OF ROC FEES PAID BY THE ASSESSEE COMPANY. 2.1 THE ASSESSEES APPEAL BEFORE THE LD. CIT (A) WAS DISMISSED AND NOW THE ASSESSEE HAS APPROACHED THIS T RIBUNAL CHALLENGING BOTH THE ADDITIONS/DISALLOWANCES BY RAI SING THE FOLLOWING GROUNDS OF APPEAL: 3 ITA NO.316/DEL/2019 ROCKLAND DIAGNOSTICS SERVICES P VT. LTD. VS. ITO 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LD. CIT(APPEALS) IS BAD BOTH IN THE E YES OF LAW AND ON FACTS. 2. THAT THE LD. CIT (APPEALS) HAS ERRED ON FACTS AN D IN LAW IN CONFIRMING THE ACTION OF THE AO I.E. REJECTI NG THE JUSTIFICATION OF SHARE PREMIUM ON THE BASIS OF DISC OUNTED CASH FLOW (DCF) METHOD. 3. THAT THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE SHARE PREMIUM HAS BEEN CHARGED ON THE BASIS OF VALUATION REPORT BY QUALIFI ED CHARTERED ACCOUNTANT FOLLOWING DISCOUNTED CASH FLOW (DCF) METHOD. 4. THAT THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE AO I.E. CONFIRM ING THE ADDITION OF RS.1,07,82,456/-. 5. THAT THE LD. CIT(APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS.4,09,250/- REL ATED TO FEE PAID TO ROC FOR ENHANCEMENT OF AUTHORIZED SHARE CAPITAL. 6. THAT THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN RELAYING ON IRRELEVANT CASE LAWS AND IGNORIN G THE RELEVANT JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT. 4 ITA NO.316/DEL/2019 ROCKLAND DIAGNOSTICS SERVICES P VT. LTD. VS. ITO 7. THAT THE LD. CIT(APPEALS) HAS ERRED ON FACTS A ND IN LAW IN DECIDING THE APPEAL OF THE APPELLANT PURELY ON PROBABILITIES WITHOUT CORROBORATING WITH RELEVANT M ATERIAL AND CONFIRMING THE ASSESSMENT WHICH WAS ALSO BASED UPON ASSUMPTIONS ONLY. 8. THAT THE IMPUGNED APPELLATE ORDER IS ARBITRARY, ILLEGAL, BAD IN LAW AND IN VIOLATION OF RUDIMENTARY PRINCIPL ES OF CONTEMPORARY JURISPRUDENCE. 9. THAT THE APPELLATE CRAVES LEAVE TO ADD/ALTER ANY /ALL GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 3.0 THE LD. AUTHORIZED REPRESENTATIVE (AR) SUB MITTED THAT DURING THE YEAR UNDER CONSIDERATION, ROCKLAND HOSP ITALS LIMITED HAD SUBSCRIBED TO 3,26,741 EQUITY SHARES OF THE ASS ESSEE COMPANY AT THE RATE RS. 10/- EACH (RS. 32,67,410/-) ALONG WI TH RS. 33/- AS SHARE PREMIUM (RS. 1,07,82,453/-) FOR THE PURPOSE O F RUNNING THE ANCILLARY SERVICES LIKE IN HOUSE DIAGNOSTIC CENTRE, LABORATORIES ETC. IT WAS SUBMITTED THAT FOR THE ISSUANCE OF FRESH SHARES, THE ASSESSEE COMPANY GOT THE VALUATION OF ITS SHARES BY M/S J JA IN AND COMPANY, CHARTERED ACCOUNTANTS, WHICH HAD VALUED ALO NG WITH THE 5 ITA NO.316/DEL/2019 ROCKLAND DIAGNOSTICS SERVICES P VT. LTD. VS. ITO UPCOMING BUSINESS PROSPECTS OF RECENTLY FORMED COMP ANY AT THE RATE OF 43/- PER SHARE ON THE BASIS OF DISCOUNTED C ASH FLOW (DCF) METHOD. IT WAS FURTHER SUBMITTED BY THE LD. AR THAT AS PER THE SAID VALUATION REPORT, THE DCF VALUATION OF THE COMPANY WAS ESTIMATED AT RS. 218.49 PER SHARE AT AN ENTERPRISE VALUE OF R S. 44.79 CRORES. THE LD. AR SUBMITTED THAT, THUS, THE ASSESSEE HAD I SSUED NEW SHARES AT A PRICE LOWER THAN THAT COMPUTED AS PER T HE DCF METHOD I.E. AT THE RATE OF RS. 43/- PER SHARE AGAINST DCF VALUE OF RS 218.49 PER SHARE ARRIVED AT IN THE SAID VALUATION REPORT. 3.1 IT WAS SUBMITTED BY THE LD. AR THAT THE ASSESSI NG OFFICER (AO) DISREGARDED THE VALUATION REPORT MAINLY ON GRO UND THAT VALUATION OF EQUITY SHARES WAS BASED ON A PROJECTION OF REVENUE WHICH DID NOT MATCH WITH ACTUAL REVENUES OF SUBSEQUEN T YEARS. IT WAS FURTHER SUBMITTED THAT IN ADDITION TO THE ABOVE, THE AO ADOPTED THE FAIR MARKET VALUE OF SUCH SHARES AT RS. 10/- BE ING THE PRICE PAID BY THE ROCKLAND HOSPITAL TO ACQUIRE SHARES OF THE ERSTWHILE SHAREHOLDERS IN THE MONTH OF NOVEMBER, 2014 AND THI S ACTION OF THE AO WAS CONFIRMED BY LEARNED COMMISSIONER OF INCOME T AX (APPEALS). 6 ITA NO.316/DEL/2019 ROCKLAND DIAGNOSTICS SERVICES P VT. LTD. VS. ITO 3.2 THE LD. AR FURTHER SUBMITTED THAT THE ENTI RE AMOUNT RECEIVED ON ISSUANCE OF FRESH SHARES WAS INV ESTED IN CAPITAL WORK IN PROGRESS, WHICH AT 31, MARCH 2015, S TOOD AT RS. 1.44 CRORES IN THE BOOKS OF ACCOUNTS WHICH WOULD CLEA RLY SHOW THAT THE REQUIREMENT OF FRESH SHARE CAPITAL AT A PREMIUM WAS USED FOR BONA FIDE PURPOSES AND IN FURTHERANCE OF THE OBJECTIVE TO ST ART THE DIAGNOSTIC CENTRE. 3.3 THE LD. AR SUBMITTED THAT THE MAIN ISSUE ARISING IN THE APPEAL IS WHETHER THE VALUATION AS PE R THIS METHOD PRESCRIBED UNDER SECTION 56 (2)(VIIB) OF THE ACT CO ULD BE DISREGARDED ON MERE ASSUMPTIONS/SURMISES ON THE GROUND THAT THE VALUATION OF EQUITY SHARES WAS BASED ON PROJECTION OF REVENUE WHIC H DID NOT MATCH WITH THE ACTUAL REVENUES OF SUBSEQUENT YEARS . 3.4 THE LD. AR SUBMITTED THAT THE SHAREHOLDER WHO INVESTED IN THE SHARES IS ROCKLAND HOSPITAL WHO HAS A GOOD TRACK RECORD AND HAS BEEN SUCCESSFULLY RUNNING THR EE HOSPITALS IN DELHI AND NCR UNDER THE BRAND NAME OF ROCKLAND. T HE FOOTFALL OF PATIENTS FROM MANY SEGMENTS OF SOCIETY IS VERY HIGH I.E. ECHS/CGHS/PUBLIC SECTOR COMPANIES. BEING A COMPANY ENGAGED 7 ITA NO.316/DEL/2019 ROCKLAND DIAGNOSTICS SERVICES P VT. LTD. VS. ITO IN HEALTHCARE BUSINESS HAVING EXCEPTIONAL GROWTH PR OSPECTS IN FUTURE AND PROMOTERS BEING THEMSELVES OF REPUTED HE ALTH SERVICES PROVIDER, THE ESTIMATES OF FUTURE REVENUE WERE IN L INE WITH THE INDUSTRY GROWTH AND PROSPECTS AND ACCORDINGLY, THE A PPLICATION OF THE DCF METHOD IS THE MOST APPROPRIATE METHOD AND I S RECOGNIZED IN RULE 11UA OF THE INCOME TAX RULES, 1962 BY THE L EGISLATURE ITSELF. 3.5 THE LD. AR SUBMITTED THAT THERE ARE NUME ROUS JUDICIAL PRECEDENTS WHEREIN THE TRIBUNAL HAS HELD TH AT AS PER SECTION 56(2)(VIIB) READ WITH RULE 11UA OF THE RULES , EVERY ASSESSEE HAS AN OPTION TO DO VALUATION OF SHARES AND DETERMI NE FAIR MARKET VALUE EITHER BY DCF METHOD OR NAV METHOD AND THAT T HE ASSESSING OFFICER CANNOT EXAMINE OR SUBSTITUTE HIS OWN VALUE I N PLACE OF VALUE SO DETERMINED. IT WAS FURTHER ARGUED THAT THE TRIBUN AL, IN NUMEROUS DECISIONS, HAD SPECIFICALLY REJECTED THE C ONTENTION OF THE REVENUE TO RELY OF COMPARISON WITH ACTUAL REVENUES I N FUTURE WITH ESTIMATED FUTURE REVENUE DISCLOSED IN THE VALUATION REPORT. RELIANCE WAS PLACED ON THE FOLLOWING ORDERS PASSED BY THE DELH I BENCHES OF THE TRIBUNAL: 8 ITA NO.316/DEL/2019 ROCKLAND DIAGNOSTICS SERVICES P VT. LTD. VS. ITO CINESTAAN ENTERTAINMENT (P.) LTD. V. INCOME TAX OFF ICER, WARD- 6(2), NEW DELHI [2019] 106 TAXMANN.COM 300 (DELHI - TRIB.) INTELLIGRAPE SOFTWARE PVT. LTD., V. ITO, ITA NO. 3925/DEL/2018(DELHI - TRIB.) KARMIC LAB VS ITO, ITA NO. 3955/MUIT1/2018, ORDER D ATED AUGUST 10, 2010 MUM) INDIA TODAY ONLINE (P.) LTD. V. INCOME TAX OFFICER, WARD-12(2), NEW DELHI [2019] 104 TAXMANN.COM 385 (DELHI - TRIB.) 3.6 THE LD. AR ALSO SUBMITTED THAT THE DCF METHOD IS A RECOGNIZED METHOD BUT IT IS NOT AN EXACT SCIENCE AN D CAN NEVER BE DONE WITH ARITHMETIC PRECISION AND, THEREFORE, THE V ALUATION BY A VALUER HAS TO BE ACCEPTED UNLESS, SPECIFIC DISCREPA NCY IN THE FIGURES AND FACTORS TAKEN ARE FOUND. THE LD. AR ALSO SUBMIT TED THAT FUTURE EVENTS ARE BEYOND THE CONTROL OF THE ASSESSEE COMPA NY, AND CANNOT BE MADE THE BASIS TO ALLEGE THAT THE VALUATION MADE PRIOR TO THE FUTURE EVENTS IS UNREALISTIC OR INCORRECT. 9 ITA NO.316/DEL/2019 ROCKLAND DIAGNOSTICS SERVICES P VT. LTD. VS. ITO 3.7 WITH REFERENCE TO THE DISALLOWANCE OF THE ROC FEES, THE LD. AR SUBMITTED THAT THE ASSESSEE HAD AM ORTISED THE SAME AS PER LAW. 4.0 IN RESPONSE, THE LD. SR. DR PLACED R ELIANCE ON THE OBSERVATIONS AND FINDINGS OF THE LD. CIT (A) AND SU BMITTED THAT THE LD. CIT (A) HAS MADE A CATEGORICAL OBSERVATION THAT THE VALUATION REPORT WAS PREPARED BY A CHARTERED ACCOUNTANT ON THE BASIS OF THE DATA PROVIDED BY THE MANAGEMENT OF THE COMPANY WHO H AD NOT GONE INTO THE ACCURACY OF THE INFORMATION RELIED UP ON IN HIS REPORT AND THAT THE CHARTERED ACCOUNTANT HAD NOT MADE ANY INDEPENDENT INVESTIGATION, EXAMINATION, ANALYSIS, ETC ON THE RE LIABILITY OF THE DATA PROVIDED BY THE MANAGEMENT OF THE COMPANY AS WA S EVIDENT FROM THE DISCLAIMER CERTIFICATE BY THE CHARTERED AC COUNTANT IN THE VALUATION REPORT. 4.1 WITH RESPECT TO THE DISALLOWANCE OF ROC F EES, THE LD. SR. DR PLACED RELIANCE ON THE OBSERVATIONS OF THE ASSESSING OFFICER. 10 ITA NO.316/DEL/2019 ROCKLAND DIAGNOSTICS SERVICES P VT. LTD. VS. ITO 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALSO PERUSED THE MATERIAL ON RECORD. SO FAR AS THE ISSUE OF ADDITION OF RS.1,07,82,453/- IS CONCERNED, IT IS SEEN THAT T HE ASSESSING OFFICER HAS DISREGARDED THE VALUATION REPORT MAINLY ON THE GROUND THAT VALUATION OF EQUITY SHARES WAS BASED ON PROJEC TION OF REVENUE WHICH DID NOT MATCH WITH THE ACTUAL REVENUE DURING TH E SUBSEQUENT YEARS. IN ADDITION, THE ASSESSING OFFICER HAS ALSO ADOPTED THE FAIR MARKET VALUE OF THE SHARES AT RS.10/- BEING THE PRI CE PAID BY THE ROCKLAND HOSPITAL LIMITED TO ACQUIRE SHARES OF ERST WHILE SHAREHOLDERS IN THE MONTH OF NOVEMBER, 2014. APPAR ENTLY, THE ASSESSING OFFICER HAS PROCEEDED ON MERE ASSUMPTIONS AND SURMISES WHILE DISREGARDING THE VALUATION REPORT SUB MITTED BY THE ASSESSEE. THE ASSESSEE HAS APPLIED THE DCF METHOD F OR THE PURPOSES OF VALUATION OF SHARES AND HAS RELIED ON T HE VALUATION REPORT OF THE CHARTERED ACCOUNTANT IN THIS REGARD. THERE IS SETTLED LAW ON THE ISSUE THAT AS PER SEC. 56(2)(VIIB) OF THE ACT READ WITH RULE-11 UA OF THE INCOME TAX RULES, 1962, EVERY ASS ESSEE HAS AN OPTION TO DO VALUATION OF SHARES AND DETERMINE ITS FAIR MARKET VALUE EITHER BY DCF METHOD OR NAV METHOD, AND THAT THE 11 ITA NO.316/DEL/2019 ROCKLAND DIAGNOSTICS SERVICES P VT. LTD. VS. ITO ASSESSING OFFICER CANNOT EXAMINE OR SUBSTITUTE HIS OWN VALUE IN PLACE OF THE VALUE SO DETERMINED. THE ITAT DELHI B ENCH IN THE CASE OF CINESTAAN ENTERTAINMENT (P.) LTD. VS. ITO, REPORTED IN [2019] 106 TAXMANN.COM 300 (DELHI TRIBUNAL), HAS HELD AS UNDER: 32. SECTION 56 (2) (VIIB) IS A DEEMING PROVISION A ND ONE CANNOT EXPAND THE MEANING OF SCOPE OF ANY WORD WHIL E INTERPRETING SUCH DEEMING PROVISION. IF THE STATUTE PROVIDES THAT THE VALUATION HAS TO BE DONE AS PER THE PRESCR IBED METHOD AND IF ONE OF THE PRESCRIBED METHODS HAS BEE N ADOPTED BY THE ASSESSEE, THEN ASSESSING OFFICER HAS TO ACCEPT THE SAME AND IN CASE HE IS NOT SATISFIED, TH EN WE DO NOT WE FIND ANY EXPRESS PROVISION UNDER THE ACT OR RULES, WHERE ASSESSING OFFICER CAN ADOPT HIS OWN VALUATION IN DCF METHOD OR GET IT VALUED BY SOME DIFFERENT VALUER. T HERE HAS TO BE SOME ENABLING PROVISION UNDER THE RULE OR THE ACT WHERE ASSESSING OFFICER HAS BEEN GIVEN A POWER TO T INKER WITH THE VALUATION REPORT OBTAINED BY AN INDEPENDEN T VALUER AS PER THE QUALIFICATION GIVEN IN THE RULE 11U. HER E, IN THIS CASE, ASSESSING OFFICER HAS TINKERED WITH DCF METHO DOLOGY AND REJECTED HY COMPARING THE PROJECTIONS WITH ACTU AL FIGURES. THE RULES PROVIDE FOR TWO VALUATION METHODOLOGIES, ONE IS ASSETS BASED NAV METHOD WHICH IS BASED ON ACTUAL NU MBERS AS PER LATEST AUDITED FINANCIALS OF THE ASSESSEE CO MPANY. WHEREAS IN A DCF METHOD, THE VALUE IS BASED ON ESTI MATED 12 ITA NO.316/DEL/2019 ROCKLAND DIAGNOSTICS SERVICES P VT. LTD. VS. ITO FUTURE PROJECTION. THESE PROJECTIONS ARE BASED ON V ARIOUS FACTORS AND PROJECTIONS MADE BY THE MANAGEMENT AND THE VALUER, LIKE GROWTH OF THE COMPANY, ECONOMIC/MARKET CONDITIONS, BUSINESS CONDITIONS, EXPECTED DEMAND AN D SUPPLY, COST OF CAPITAL AND HOST OF OTHER FACTORS. THESE FACTORS ARE CONSIDERED BASED ON SOME REASONABLE APPROACH AN D THEY CANNOT BE EVALUATED PURELY BASED ON ARITHMETICAL PR ECISION AS VALUE IS ALWAYS WORKED OUT BASED ON APPROXIMATIO N AND CATENA OF UNDERLINE FACTS AND ASSUMPTIONS. NEVERTHE LESS, AT THE TIME WHEN VALUATION IS MADE, IT IS BASED ON REF LECTIONS OF THE POTENTIAL VALUE OF BUSINESS AT THAT PARTICULAR TIME AND ALSO KEEPING IN MIND UNDERLINE FACTORS THAT MAY CHA NGE OVER THE PERIOD OF TIME AND THUS, THE VALUE WHICH IS REL EVANT TODAY MAY NOT BE RELEVANT AFTER CERTAIN PERIOD OF TIME. . .. 33. IN ANY CASE, IF LAW PROVIDES THE ASSESSEE TO GE T THE VALUATION DONE FROM A PRESCRIBED EXPERT AS PER THE PRESCRIBED METHOD, THEN THE SAME CANNOT BE REJECTED BECAUSE NE ITHER THE ASSESSING OFFICER NOR THE ASSESSEE HAVE BEEN RE COGNIZED AS EXPERT UNDER THE LAW. 5.1 SIMILARLY, IT HAS BEEN HELD THAT WHERE A VALU ATION REPORT IS TO BE REJECTED, THE AUTHORITY SHOULD PINP OINT ANY SPECIFIC INACCURACIES OR SHORT COMINGS IN THE DCF VALUATION REPORT. IN THE 13 ITA NO.316/DEL/2019 ROCKLAND DIAGNOSTICS SERVICES P VT. LTD. VS. ITO CASE OF INTELLIGRAPE SOFTWARE PVT. LTD., VS. ITO IN ITA NO.3925-DEL- 2018 (DELHI TRIB.), IT HAS BEEN HELD AS UNDER: 23. THE AO WAS NOT ABLE TO PINPOINT ANY SPECIFI C INACCURACIES OR SHORT COMINGS IN THE DCF VALUATION REPORT OF THE CHARTERED ACCOUNTANT/VALUER OTHER THAN STATING THAT YEAR-WISE RESULTS AS PROJECTED ARE NOT MATCHING WIT H THE ACTUAL RESULTS DECLARED IN THE FINAL ACCOUNTS. BEFO RE THE ID. CIT (A), REASONS FOR VARIATION BETWEEN PROJECTED AN D ACTUALS WERE DULY EXPLAINED. THE LD. CIT (A) HAS ACCEPTED S UCH EXPLANATION BUT REJECTED THE DCF VALUATION REPORT A S SUBMITTED BY THE ASSESSEE. ACCORDINGLY, IN THE ABSE NCE OF ANY DEFECT IN THE VALUATION OF SHARES ARRIVED BY TH E ASSESSEE ON THE BASIS OF DCF METHOD, IMPUGNED ADDITION AS MA DE ON THE BASIS OF NET ASSET VALUE METHOD IS LIABLE TO BE DELETED. THE REJECTION IS UNJUSTIFIED AS THE VALUATION REPOR T IS REQUIRED UNDER RULE 11UA OF THE INCOME TAX RULES IS BASED ON THE FUTURE ASPECTS OF THE COMPANY AT THE TIME OF ISSUIN G THE SHARES, IT MAY VARY FROM THE ACTUAL FIGURES DEPENDI NG ON THE MARKET CONDITION AT THE PRESENT POINT OF THE TIME. 24. THUS, KEEPING IN VIEW THE ENTIRE FACTS OF T HE CASE, THE REPORTS OF THE VALUER, THE COMPARISON OF THE ACTUAL AND PROJECTED REVENUES, PROVISIONS OF SECTION 56(2)(VII B) AND KEEPING IN VIEW THE ORDER OF CO-ORDINATE BENCH OFTT AT IN THE CASE OF CINESTAAN ENTERTAINMENT PVT. LTD. 177 ITD 809 14 ITA NO.316/DEL/2019 ROCKLAND DIAGNOSTICS SERVICES P VT. LTD. VS. ITO WHEREIN IT HAS BEEN HELD THAT THE ASSESSING OFFICER CANNOT SUBSTITUTE HIS OWN VALUE IN PLACE OF THE VALUE DETE RMINED EITHER ON DC METHOD OR NAV METHOD, THE APPEAL OF THE ASSESSEE IS HEREBY ALLOWED. 5.2 THUS, IT HAS BEEN HELD BY THE CO-ORDINATE BEN CH OF THE TRIBUNAL THAT IN ABSENCE OF ANY SPECIFIC INACCU RACIES OR SHORT COMINGS IN THE DCF VALUATION REPORT OTHER THAN STAT ING THAT YEAR- WISE RESULTS AS PROJECTED ARE NOT MATCHING WITH THE ACTUAL RESULTS DECLARED IN THE FINAL ACCOUNTS, THE ASSESSING OFFIC ER CANNOT SUBSTITUTE HIS OWN VALUE IN PLACE OF THE VALUE DETE RMINED EITHER ON DCF METHOD OR NAV METHOD. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE LOWER AUTHORITIES WERE NOT JUSTIFI ED IN REJECTING THE VALUATION REPORT AS SUBMITTED BY THE ASSESSEE IN TH IS REGARD. WE ALSO NOTE THAT THE OBSERVATION OF THE LD. CIT (A) T HAT THE CHARTERED ACCOUNTANT HAS RELIED ON THE DATA SUPPLIED BY THE A SSESSEE IN THIS REGARD IS IRRELEVANT IN AS MUCH AS THE CHARTERED AC COUNTANT HAS CARRIED OUT THE VALUATION IN ACCORDANCE WITH THE PRE SCRIBED METHOD AS PER RULE-11UA OF THE INCOME TAX RULES, 1962 AND, THEREFORE, SUCH VALUATION REPORT, IN ABSENCE OF SPECIFIC DEFEC TS BEING POINTED OUT, HAS A BINDING VALUE. WE NOTE THAT NEITHER THE LD. CIT (A) NOR 15 ITA NO.316/DEL/2019 ROCKLAND DIAGNOSTICS SERVICES P VT. LTD. VS. ITO THE ASSESSING OFFICER HAVE EVALUATED THE VALUATION REPORT IN LIGHT OF THE RELEVANT MATERIAL BUT HAVE ONLY REJECTED THE SA ME ON ASSUMPTIONS AND PRESUMPTIONS AND THE SAME CANNOT BE UPHELD. IN OUR CONSIDERED VIEW THE ASSESSING OFFICER SHOULD EXA MINE THE ISSUE AFRESH AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE IN THIS REGARD. THUS, THIS GROUND IS ALLOWED F OR STATISTICAL PURPOSES. 5.3 AS FAR AS THE ISSUE OF DISALLOWANCE O F ROC FEES IS CONCERNED, IT IS SETTLED LAW THAT ROC FEES PAID ARE TO BE CONSIDERED AS PRELIMINARILY EXPENDITURE WITHIN THE MEANING OF SECTION 35D OF THE ACT. THE SAME IS DIRECTED ACCORDINGLY. ACCORDIN GLY, THIS GROUND STANDS ALLOWED. 6.0 IN THE FINAL RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED ON 25 TH FEBRUARY, 2021. SD/- SD/- (N.K. BILLAIYA) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25/02/2021 PK/PS 16 ITA NO.316/DEL/2019 ROCKLAND DIAGNOSTICS SERVICES P VT. LTD. VS. ITO COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI