M/s. Aahvan Agencies Limited, Ahmedabad V. The Deputy Commissioner of Income Tax, Circle-1(1)(1), Ahmedabad

ITA 6/AHD/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2706 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 02-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Deemed to accrue or arise in india; Fair market value
• Section: 143(3); 6; 56; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER M/S. AAHVAN AGENCIES LTD. (FORMERLY KNOWN AS AGRIMORE LTD.) 1 ST FLOOR, AKSHAY, 53, SHRIMALI SOCIETY, NAVRANGPURA, AHMEDABAD PAN: AACCA3738Q (APPELLANT) VS THE D CIT, CIRCLE - 1 (1)(1) , AHMEDABAD (RESPONDENT) REVENUE BY : S H RI KAMLESH MAKWANA , SR. D . R. ASSESSEE BY: SHRI S.N. SOPARKAR WITH MS. URVASHI SHODHAN, ARS. DATE OF HEARING : 05 - 12 - 2 018 DATE OF PRONOUNCEMENT : 21 - 02 - 2 019 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2012 - 13 , ARI SES FROM ORDER OF THE CIT(A) - 1, AHMEDABAD DATED 30 - 11 - 2 016 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 06 / A HD/20 17 A SS ESSMENT YEAR 2012 - 13 I .T.A NO. 06 /AHD/20 17 A.Y. 2012 - 13 PAGE NO M/S. AAHVAN AGENCIES LTD. VS. D CIT 2 2. THE G ROUND NO. 1 TO 4 OF THE ASSESSEE ARE PERTAINED TO THE COMMON ISSUED ON CONFIRMING ADDITION OF RS. 1 , 82 , 87 , 906/ - ON ACCOUNT OF DIFFERENCE IN MARKET VALUE OF UNQUOTED SHARES U/S. 56 OF THE ACT. 3. THE ASSESSEE HAS NOT PRESSED GROUND 5 BECAUSE OF SMALLNESS O F THE AMOUNT, THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 4. GROUND NO S . 6 & 7 DO NOT REQUIRE ANY ADJUDICATION BECAUSE OF GENERAL NATURE OF GROUNDS OF APPEAL. 5. THE FACT IN BRIEF ARE THAT ASSESSEE HAS FILED RETURN OF INCOME ON 29 TH SEP, 2012 OF RS. 64 , 99 , 491/ - . SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 23 RD SEP, 2013. ON VERIFICATION OF THE DETAIL FILED, THE ASSESSING OFFICER NOTICED THAT ASSSESSEE HAS SHOWN INCOME FROM OTHER SOURCES AMOU NTING TO RS. 1 , 87 , 49 , 397/ - UNDER THE HEAD DEEMED INCOME U/S. 56 OF THE ACT. ON FURTHER VERIFICATION, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS PURCHASED SHARES OF M/S SUBIDHA DAIRY PVT. LTD. @ RS. 1.25 PER SHARE TO THE AMOUNT OF RS. 17 , 75 , 563/ - AND TOTAL NO. OF SHARES PURCHASED WERE 1420451/ - . HE HAS ALSO NOTICED THAT ASSESSEE HAS PURCHASED SHARES OF OSIA ENTERPRISE PVT. LTD. @ 1/ - TO THE AMOUNT OF RS. 2 LAC AND TOTAL NO. OF SHARES PURCHASED WAS 2 LACS. T HE ASSESSE H A S WORKED OUT BOOK VALUE AS P ER RULE 11UA IN RESPECT TO SHARES OF SUBIDHA DAIRY PVT. LTD. AT RS. 11 PER SHARE AND SHOWN AN AMOUNT OF RS. 1 , 38 , 49 , 397/ - AS INCOME FROM OTHER SOURCES. IT HAS WORKED OUT VALUE OF SHARES OF OSIA ENTERPRISE PVT. LTD. AS PER RULE 11 UA AT THE R ATE OF RS . 25.70 PER SHARE AND SHOWN AN AMOUNT OF RS. 49 ,00000 AS INCOME FROM OTHER I .T.A NO. 06 /AHD/20 17 A.Y. 2012 - 13 PAGE NO M/S. AAHVAN AGENCIES LTD. VS. D CIT 3 SOURCES. THE TOTAL AMOUNT OF DIFFERENCE IN THE SAID VALUATION IN RESPECT OF THE AFORESAID COMPANIES OF RS. 1 , 87 , 49 , 397/ - WAS SHOWN U/S. 56 OF THE ACT. T HE ASSESSING OFFICER ON V ERIFICATION OF THE BALANCE SHEET OF SUBIDHA DAIRY PVT. LTD. OBSERVED THAT THE SAID COMPANY WAS HOLDI NG THE FULLY PAID EQUITY SHARE ( QUOTED SHARES ) AS MENTIONED AT PAGE 4 OF THE ASSESSMENT ORDER AS INVESTMENT AS ON 31 ST MARCH, 2011. T HE ASSESSING OFFIC ER HAS FURTHER OBSERVED THAT ASSESSEE COMPANY HAS ACQUIRED THE SHARES OF SUBIDHA DAIRY PVT. LTD. AND M/S OSIA ENTERPRISE PVT. LTD. B OTH UNQUOTED COMPANIES , H OWEVER IN THE BALANCE SHEET OF THESE COMPANIES IT WAS NOTICED THA T THESE COMPANIES WERE HOLDING T HE INVESTMENT IN THE QUOTED SHARES OF OTHER COMPANIES , THEREFORE, IT IS REQUIRED TO VALUE THE SAME AS PER MARKET RATE OF QUOTED SHA R ES PREVAILING IN THE STOCK EXCHANGE ON THE D ATE OF VALUATION ON 31 ST MARCH, 2012. THE ASSESSING OFFICER HAS STATED THAT ASS ESSEE HAS ADOPTED A COLORABLE DEVICE TO REDUCE I TS INCOME ON ACCOUNT OF TRANSFER OF QUOTED SHARES BY WAY OF ACQUIRING THE SHARES (UNQUOTED OF M/S SUBIDHA DAIRY PVT. LTD. AND M/S OSIA ENTERPRISE LTD.). THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESS EE COMPANY WAS HOLDING THE QUOTED SHARES OF LIMITED COMPANIES AND THIS HAS ALSO BE TAKEN INTO ACCOUNT FOR THE VALUATION OF THE SHARES OF THE ASSESSEE COMPANY AS P ER THE APPROPRIATE RULE 11 UA OF THE IT RULES. CONSEQUENTLY , THE ASSESSING OFFICER HAS ADD ED THE DIFFERENCE AMOUNT ON ACCOUNT OF PRICES OF QUOTED SHA R ES TO THE AMOUNT FOR RS . 1 , 82 , 87 , 906/ - TO THE TOTAL INCOME OF THE ASSESSEE AS WORKED OUT AT PAGES 8 AND 13 OF THE ASSESSMENT ORDER . 6. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE REITERATING REASON MENTIONED BY THE ASSESSING OFFICER . I .T.A NO. 06 /AHD/20 17 A.Y. 2012 - 13 PAGE NO M/S. AAHVAN AGENCIES LTD. VS. D CIT 4 7. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS SUBMITTED PAPER BOOK CONTAINING DETAIL AND SUBMISSION MADE BEFOR E THE ASSESSING OFFICER AND LD. CIT(A) DURING THE COU R SE OF ASSESSMENT PROCEEDINGS AND APPELLATE PROCEEDINGS. THE LD . COUNS EL HAS ALSO CONTENDED THAT ASSESSEE HAS CORRECTLY DETERMINED THE VALUE OF UNQUOTED EQUITY SHARES ON THE BASIS OF RULE 11U AN D 11UA A S PROVIDED IN THE AC T STRICTLY IN ACCORDANCE WITH THE ABOVE RU LE, THEREFORE, THE DECISION O F L D. CIT(A) IS NOT CORRECT. ON THE OTHER HAND , LD . DEPARTMENTAL REPRESENTATIVE HAS SUPPO R TED THE ORDER OF LD. CIT(A) . THE LD. COUNSEL HAS ALSO PLACED RELIANCE ON THE DECISIONS OF (2018) 92 TAXMAN.COM 29 (DELHI - TRIB) MINDA S M TECHNOCAST PVT. LTD. VS. ADDL. CIT DATED 7 TH MARCH, 2018 & (2018) 99 TAXMANN.COM 157 (MUMBAI - TRIB) SMITI HOLDING & TRADING CO. (P) LTD. VS. PRINCIPAL CIT DATED 25 TH SEP, 2018 . 8 . WE HAVE H EARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVES WE HAVE GONE THROUGH THE MATERIAL ON RECORD AND NOTICED THAT THE ASSESSEE COMPANY HAS ACQUIRED THE SHARES OF M/S SUVIDHA DAIRY PVT. LTD . AND M/S OSIA ENTERPRISE PVT. LTD. WHICH WERE UNQUOTED COMPANIES AND IT HAD OFFERED THE FAIR MARKET VALUE ACCORDING TO RULE 11 UA OF THE IT RULES 1962. THE AS S E S SEE HAS WO RKE D THE BOOK VALUE AS P ER RU LE 11UA AND OFFERED DIFFERENCE ON ACCOUNT OF SAID VALUA TION OF R S.1 , 87 , 49 , 397/ - U/S. 56 OF THE ACT. WE HAVE NOTICED THAT SIMILAR ISSUE ON IDENTICAL FACTS HAVE BEEN ARISEN IN THE CASES OF THE (2018) 92 TAXMAN.COM 29 (DELHI - TRIB) MINDA S M TECHNOCAST PVT. LTD. VS. ADDL. CIT DATED 7 TH MARCH, 2018 & (2018) 9 9 TAXMANN.COM 157 (MUMBAI - TRIB) SMITI HOLDING & TRADING CO. (P) LTD. VS. PRINCIPAL CIT I .T.A NO. 06 /AHD/20 17 A.Y. 2012 - 13 PAGE NO M/S. AAHVAN AGENCIES LTD. VS. D CIT 5 DATED 25 TH SEP, 2018 W ITH THE ASSISTANCE OF THE LD. COUNSEL WE HAVE GONE THROUGH T HE AFORESAID DECISIONS OF ITAT MUMBAI AND ITAT DELHI BENCHES AND NOTICED THAT ITAT DELHI IN THE ABOVE REFERRED CASE HAS ADJUDICATED THE SAME ISSUE ON IDENTICAL FACTS AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. RELEVANT PART OF THE DECISION IS REPRODUCED AS UNDER: - 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, THE ASSESSEE HAS ACQUIRED SHARES OF TEPL AT RS.5 PER SHARES. THE SHARES WERE ACQUIRED BY THE ASSESSEE FROM THREE COMPANIES AS DISCUSSED IN THE PRECEDING PARAGRAPHS. THE ASSESSEE CLAIMED TO HAVE VALUED THE SHARES OF TEPL AS PER THE PROVISIONS OF RULE 11UA OF THE RULES AND FILED A COPY OF THE REPORT PREPARED BY THE CHARTERED ACCOUNTANTS IN SUPPORT HIS CLAIM TO JUSTIFY THE PRICE OF SHARES AT WHICH THESE WERE ACQUIRED. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSETS DECLARED BY THE TEPL IN ITS BALANCE SHEET SHOULD HAVE BEEN VALUED AS PER THE CIRCLE RATE WHILE DETERMINING THE VALUE OF THE SHARES ACQUIRED BY THE ASSESSEE. ACCORDINGLY, THE ASSESSING OFFICER DETERMINED THE VALUE OF THE SHARES AT R S. 45.72 PER SHARES OF TEPL. THUS, THE DIFFERENCE OF RS. 40.72 WAS TREATED AS INCOME FROM OTHER SOURCES OF THE ASSESSEE UNDER THE PROVISIONS OF SECTION 56(2)(VIIA) OF THE ACT. THE VIEW TAKEN BY THE ASSE SSING OFFICER WAS SUBSEQUENTLY CONFIRMED BY THE LEARNED CIT(A). 6.1 NOW, THE ISSUE BEFORE US ARISES FOR OUR ADJUDICATION SO AS TO WHETHER THE LAND SHOWN BY THE TEPL SHOULD BE TAKEN AS PER THE BOOK VALUE OR AS PER THE MARKET VALUE WHILE VALUING ITS SHARES. AT THIS JUNCTURE, WE FIND IMPORTANT TO REFER THE PROVISIONS OF SECTION 56(2)(VIIA) OF THE ACT, WHICH READS AS UNDER: '56. (1) INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED FROM THE TOTAL INCOME UNDER THIS ACT SHALL BE CHARGEABLE TO INCOME - TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES', IF IT IS NOT CHARGEABLE TO INCOME - TAX UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14, ITEMS A TO E. (2) IN PARTICULAR, AND WITHOUT PREJUDICE TO THE GENERALITY OF THE PR OVISIONS OF SUB - SECTION (1), THE FOLLOWING INCOMES, SHALL BE CHARGEABLE TO INCOME - TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES', NAMELY : -- (I)XXXXXXXXXXXXXX (VIIA) WHERE A FIRM OR A COMPANY NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTER ESTED, RECEIVES, IN ANY PREVIOUS YEAR, FROM ANY PERSON OR PERSONS, ON OR AFTER THE 1ST DAY OF JUNE, 2010, ANY PROPERTY, BEING SHARES OF A COMPANY NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, -- (I) XXXXXXXXXX (II) FOR A CONSIDERATIO N WHICH IS LESS THAN THE AGGREGATE FAIR MARKET VALUE OF THE PROPERTY BY AN AMOUNT EXCEEDING FIFTY THOUSAND RUPEES, THE AGGREGATE FAIR MARKET VALUE OF SUCH PROPERTY AS EXCEEDS SUCH CONSIDERATION : PROVIDED THAT THIS CLAUSE SHALL NOT APPLY TO ANY SUCH PROPER TY RECEIVED BY WAY OF A TRANSACTION NOT REGARDED AS TRANSFER UNDER CLAUSE (VIA) OR CLAUSE (VIC) OR CLAUSE (VICB) OR CLAUSE (VID) OR CLAUSE (VII) OFSECTION 47. EXPLANATION. -- FOR THE PURPOSES OF THIS CLAUSE, 'FAIR MARKET VALUE' OF A PROPERTY, BEING SHARES OF A COMPANY NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, SHALL HAVE THE MEANING ASSIGNED TO IT IN THE EXPLANATION TO CLAUSE (VII);]' 6.2 THE FAIR MARKET VALUE AS PER THE EXPLANATION OF SECTION 56(2)(VII) OF THE ACT, READS AS UNDER: I .T.A NO. 06 /AHD/20 17 A.Y. 2012 - 13 PAGE NO M/S. AAHVAN AGENCIES LTD. VS. D CIT 6 (B) 'FAIR MARKET VALUE' OF A PROPERTY, OTHER THAN AN IMMOVABLE PROPERTY, MEANS THE VALUE DETERMINED IN ACCORDANCE WITH THE METHOD AS MAY BE PRESCRIBED' 6.3 SIMILARLY, THE PROVISIONS OF 11UA OF THE RULES ARE SUMMARIZED AS UNDER: '(B) THE FAIR MARKET VALUE OF UNQUOTED EQUITY SHARES SHALL BE THE VALUE, ON THE VALUATION DATE, OF SUCH UNQUOTED EQUITY SHARES AS DETERMINED IN THE FOLLOWING MANNER, NAMELY: -- (A - L) THE FAIR MARKET VALUE OF UNQUOTED EQUITY SHARE S = (PE) (PV), WHERE, A = BOOK VALUE OF THE ASSETS IN THE BALANCE - SHEET AS REDUCED 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 - TAX ACT AND ANY AMOUNT SHOWN IN THE BALANCE - SHEET AS ASSET INCLUDING THE UNAMORTISED AMOUNT OF DEFERRED EXPENDITURE WHICH DOES NOT REPRESENT THE VALUE OF ANY 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 PREFERENCE SHARES AND EQUITY SHARES WHERE SUCH DIVIDENDS HAVE NOT BEEN DECLARED 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 DEPRECIATION; (IV) ANY AMOUNT REPRESENTING PROVISION FOR TAXATION, OTHE R THAN 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 - TAX ACT , TO THE EXTENT OF THE EXCESS OVER THE T AX PAYABLE WITH REFERENCE TO THE BOOK PROFITS IN ACCORDANCE WITH THE LAW APPLICABLE THERETO; (V) ANY AMOUNT REPRESENTING PROVISIONS MADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILITIES; (VI) ANY AMOUNT REPRESENTING CONTINGENT LIABILITIES OTHER THAN ARREARS OF DIVIDENDS PAYABLE IN RESPECT OF CUMULATIVE PREFERENCE SHARES; PE = TOTAL AMOUNT OF PAID UP EQUITY SHARE CAPITAL AS SHOWN IN THE BALANCE - SHEET; PV = THE PAID UP VALUE OF SUCH EQUITY SHARES;' 6.4 ON THE PLAIN READING OF ABOVE RULE, IT IS REVE ALED THAT WHILE VALUING THE SHARES THE BOOK VALUE OF THE ASSETS AND LIABILITIES DECLARED BY THE TEPL SHOULD BE TAKEN INTO CONSIDERATION. THERE IS NO WHISPER UNDER THE PROVISION OF 11UA OF THE RULES TO REFER THE FAIR MARKET VALUE OF THE LAND AS TAKEN BY THE ASSESSING OFFICER AS APPLICABLE TO THE YEAR UNDER CONSIDERATION. THEREFORE, WE ARE OF THE VIEW THAT THE SHARE PRICE CALCULATED BY THE ASSESSEE OF TEPL FOR RS. 5 PER SHARES HAS BEEN DETERMINED IN ACCORDANCE WITH THE PROVISION OF RULE 11UA. IN HOLDING SO, W E FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT RELIED BY THE LEARNED AUTHORIZED REPRESENTATIVE WHICH HAS BEEN DISCUSSED IN THE PRECEDING PARAGRAPHS. THEREFORE, WE HAVE NO HESITATION IN REVERSING THE ORDER OF THE LOWER AUTHORITIES. HENCE, THE GROUNDS OF APPE AL OF THE ASSESSEE ARE ALLOWED. NOW COMING TO THE STAY PETITION FILED BY THE ASSESSEE 722/DEL/2017. AT THE OUTSET, WE OBSERVE THAT THE MAIN APPEAL OF THE ASSESSEE HAS ALREADY BEEN ADJUDICATED IN FAVOUR OF THE ASSESSEE VIDE PARA NO. 6 OF THIS ORDER. THEREFO RE, WE DO NOT FIND ANY REASON TO ADJUDICATE THE STAY PETITION SEPARATELY. HENCE, THE STAY PETITION FILED BY THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED WHEREAS THE STAY PETITION IS DISMISSED AS INFRUCTUOUS. I .T.A NO. 06 /AHD/20 17 A.Y. 2012 - 13 PAGE NO M/S. AAHVAN AGENCIES LTD. VS. D CIT 7 WE HAVE ALSO PERUSED THE ORDER OF ITAT MUMBAI BENCH (2018) 99 TAXMANN.COM 157 (MUMBAI - TRIB) SMITI HOLDING & TRADING CO. (P) LTD. VS. PRINCIPAL CIT DATED 25 TH SEP, 2018 AS REFERRED ABOVE DECIDED IN F A VOUR OF THE ASSESSEE. RELEVANT PART OF THE THIS DEC ISION OF THE CO - ORDINATE BENCH IS REPRODUCED AS UNDER: - WE FIND THAT THE ASSESSEE HAD SUBMITTED COMPUTATION OF VALUE PER SHARE UNDER RULE 11UA OF M/S. SUPRASAD INVESTMENT & TRADING CO. PVT. LTD. ALONG WITH BALANCE SHEET AS ON 31.03.2012 VIDE LETTER DATED 28.01.2016. IT IS EVIDENT FROM THE OFFICIAL SEAL DATED 28.01.2016 OF THE OFFICE OF ASSTT./DY. CIT - 8(2)( 1) MUMBAI, INDICATING THE RECEIPT. AT THIS JUNCTURE, FOR REFERENCE, WE PRODUCE BELOW RULE 11UA AS IN FORCE IN AY 2013 - 14. 'RULE HUA(L)(C)(B) 5R MARK ET VALUE OF UNQUOTED EQUITY SHARES : THE FAIR MARKET VALUE OF UNQUOTED EQUITY SHARES SHALL BE THE VALUE, ON THE VALUATION DATE, OF SUCH UNQUOTED EQUITY SHARES AS DETERMINED IN THE FOLLOWING MANNER, NAMELY: - THE FAIR MARKET VALUE OF UNQUOTED EQUITY SHARES = (A - L) X (PV)/(PE), WHERE, A= BOOK VALUE OF ALL THE ASSETS IN THE BALANCE - SHEET AS REDUCED 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 TAX ACT AND ANY AMOUNT SHOWN IN THE BALANCE SHEET AS ASSET INCLUDING THE UNAMORTISED AMOUNT OF DEFERRED EXPENDITURE WHICH DOES NOT REPRESENT THE VALUE OF ANY ASSET; L= BOOK VALUE OF LIABILITIES SHOWN IN THE BALANCE SHEET, BUT NOT INCLUDING THE FOLLOWING AMOUNTS, NAMEL Y: - (I) THE PAID - UP CAPITAL IN RESPECT OF EQUITY SHARES; (II) THE AMOUNT SET APART FOR PAYMENT OF DIVIDENDS ON PREFERENCE SHARES AND EQUITY SHARES WHERE SUCH DIVIDENDS HAVE NOT BEEN DECLARED BEFORE THE DATE OF TRANSFER AT A GENERAL BODY MEETING OF THE CO MPANY; (III) RESERVES AND SURPLUS, BY WHATEVER NAME CALLED, EVEN IF THE RESULTING FIGURE IS NEGATIVE, OTHER THAN THOSE SET APART TOWARDS DEPRECIATION; (IV) ANY AMOUNT REPRESENTING PROVISION FOR TAXATION, OTHER THAN AMOUNT OF INCOME TAX PAID, IF ANY, LES S THE AMOUNT OF INCOME - TAX CLAIMED AS REFUND, IF ANY, TO THE EXTENT OF THE EXCESS OVER THE TAX PAYABLE WITH REFERENCE TO THE BOOK PROFITS IN ACCORDANCE WITH THE LAW APPLICABLE THERETO; (V) ANY AMOUNT REPRESENTING PROVISIONS MADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILITIES; (VI) ANY AMOUNT REPRESENTING CONTINGENT LIABILITIES OTHER THAN ARREARS OF DIVIDENDS PAYABLE IN RESPECT OF CUMULATIVE PREFERENCE SHARES; PE = TOTAL AMOUNT OF PAID - UP EQUITY SHARE CAPITAL AS SHOWN IN THE BALANCE SHEET; PV = THE PAID - UP VALUE OF SUCH EQUITY SHARES;'. 6.1 A SIMILAR ISSUE AROSE IN MINDA SM TECHNOCAST (P.) LTD. (SUPRA). THE AY IS 2014 - 15. THE FACTS ARE THAT THE ASSESSEE HAD ACQUIRED SHARES OF M/S. TUFF ENGINEERING PVT. LTD. (IN SHORT TEPL') AT RS. 5 PER SHARE. THE SHARES WERE ACQUIRED BY THE ASSESSEE FROM THREE COMPANIES. THE ASSESSEE CLAIMED TO HAVE VALUED THE SHARES OF TEPL AS PER THE PROVISIONS OF RULE 11UA AND FILED A COPY OF THE REPORT PREPARED BY THE CHARTERED ACCOUNTANTS IN SUPPORT OF ITS CLAIM TO JUSTIFY THE PRICE OF SHARES AT WHICH THESE WERE REQUIRED. HOWEVER, THE AO WAS OF THE VIEW THAT THE ASSETS DECLARED BY TEPL IN ITS BALANCE SHEET SHOULD HAVE BEEN VALUED AS PER THE CIRCLE RATE WHILE DETERMINING THE VALUE OF SHARES ACQUIRED BY THE ASSESSEE. ACCORDIN GLY, THE AO DETERMINED THE VALUE OF SHARES AT RS. 45.72 PER SHARE OF TEPL AND TREATED THE DIFFERENCE OF RS. 40.72 AS INCOME FROM OTHER SOURCES UNDER SECTION 56(2)(VIIA) OF THE ACT. THE VIEW TAKEN BY THE AO WAS SUBSEQUENTLY CONFIRMED BY THE ID. CIT (A). IN APPEAL, THE TRIBUNAL VIDE ORDER DATED 07.03.2018 HELD : '6.4 ON THE PLAIN READING OF ABOVE RULE, IT IS REVEALED THAT WHILE VALUING THE SHARES THE BOOK VALUE OF THE ASSETS AND LIABILITIES DECLARED BY THE TEPL SHOULD BE TAKEN INTO I .T.A NO. 06 /AHD/20 17 A.Y. 2012 - 13 PAGE NO M/S. AAHVAN AGENCIES LTD. VS. D CIT 8 CONSIDERATION. THERE IS NO WHISPER UNDER THE PROVISION OF 11UA OF THE RULES TO REFER THE FAIR MARKET VALUE OF THE LAND AS TAKEN BY THE ASSESSING OFFICER AS APPLICABLE TO THE YEAR UNDER CONSIDERATION. THEREFORE, WE ARE OF THE VIEW THAT THE SHARE PRICE CALCULATED BY THE ASSESSEE OF TE PL FOR RS. 5 PER SHARES HAS BEEN DETERMINED IN ACCORDANCE WITH THE PROVISION OF RULE 11UA. IN HOLDING SO, WE FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT RELIED BY THE LEARNED AUTHORIZED REPRESENTATIVE WHICH HAS BEEN DISCUSSED IN THE PRECEDING PARAGRAPHS. T HEREFORE, WE HAVE NO HESITATION IN REVERSING THE ORDER OF THE LOWER AUTHORITIES. HENCE, THE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED.' 6.2 FROM THE ABOVE, IT IS EVIDENT THAT RULE 11UA AS IN FORCE IN AY 2013 - 14 DOES NOT PROVIDE TO REPLACE FAIR VALUE O F QUOTED SHARES TO BOOK VALUE AND THEREFORE, THE VALUE DERIVED BY THE DCIT 4(1)(1) CANNOT BE SUBSTITUTED TO THE VALUE AS DERIVED UNDER RULE 11UA. RULE 11UA, DURING THE RELEVANT PERIOD, PROVIDES FOR VALUATION OF UNQUOTED EQUITY SHARES BY ADOPTING THE AMOUNT AS PER 'BOOK VALUE'. IN MALABAR INDUSTRIAL CO. LTD. 'S CASE (SUPRA), THE HON'BLE SUPREME COURT HAS HELD THAT THE COMMISSIONER HAS TO BE SATISFIED WITH THE TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; A ND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THE CONDITIONS IS ABSENT - IF THE ORDER OF THE AO IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE - RECOURSE CANNOT BE HELD TO S ECTION 263(1) OF THE ACT. THE FACTUAL SCENARIO DEPICTED HEREINABOVE IS TO BE EXAMINED ON THE ANVIL OF THE ABOVE ENUNCIATION OF LAW. AS STATED EARLIER, RULE UA AS IN FORCE IN THE IMPUGNED ASSESSMENT YEAR, DOES NOT PROVIDE AND REQUIRE TO REPLACE FAIR VALUE O F QUOTED SHARES TO BOOK VALUE AND THEREFORE, THE VALUE DERIVED BY THE DCIT - 4(1)(1) CANNOT BE SUBSTITUTED TO THE VALUE AS DERIVED UNDER RULE 11UA. RULE 11UA PROVIDES FOR VALUATION OF UNQUOTED EQUITY SHARES BY ADOPTING THE AMOUNT AS PER 'BOOK VALUE'. IN VIEW OF THE ABOVE REASONS, WE SET ASIDE THE ORDER UNDER SECTION 263 PASSED BY THE PCIT. 7. IN THE RESULT, THE APPEAL IS ALLOWED. THE LD. DR COULD NOT CONTRADICT THE AFORESAID LEGAL FINDINGS WITH ANY MATERIAL . AFTER PERUSAL OF THE AFORESAID DECISIONS OF CO - ORDINATE BENCHES, WE OBSERVED THAT THE FACTS AND ISSUE IN THE CASE OF THE ASSESSEE ARE IDENTICAL TO THE FACTS OF THE AFORESAID CASES , THEREFORE , R ESPECTFULLY FOLLOWING THE DECISION AS REFERRED ABOVE , WE ALLOW THE APPEAL OF THE ASSESSEE. 9 . IN THE RESU LT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 21 - 02 - 201 9 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 21 /02 /2019 I .T.A NO. 06 /AHD/20 17 A.Y. 2012 - 13 PAGE NO M/S. AAHVAN AGENCIES LTD. VS. D CIT 9 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,