M/s. Mehta Gold Palace Limited, Bangalore V. Assistant Commissioner of Income Tax, Circle -4(1)(2) , Bangalore

ITA 927/BANG/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9288 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 15-07-2020
• Assessment Year: 2016-2017
• Appeal Filed On: 30-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA
• Keywords: Valuation report; Set aside
• Section: 44AB

Judgement Text

ITA NO.927/BANG/2019 M/S. MEHTA GOLD PALACE LTD., BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL BBENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENTAND SHRI B.R. BASKARAN, ACCOUTANT MEMBER ITA NO.927/BANG/2019 ASSESSMENTYEAR: 2016-17 M/S. MEHTA GOLD PRIVATE LIMITED #32/34, KARTHIK MANSIONS NAGARTHPET MAIN ROAD DHARMARAYA SWAMY TEMPLE BENGALURU-560 002 PAN NO : AAHCM0456E VS. ASST. COMMISSIONER OF INCOME-TAX CIRCLE-4(1)(2) BENGALURU APPELLANT RESPONDENT APPELLANT BY : SMT. SHEETHAL BORKAR, A.R. RESPONDENT BY : SHRI PRIYADARSHI MISHRA, D.R. DATE OF HEARING : 13.08.2020 DATE OF PRONOUNCEMENT : 14.08.2020 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 18.3.2019 PASSED BY LD. CIT(A)-4, BENGALURU AND IT RELATES TO ASSESSMENT YEAR 2016-17. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD. CIT(A) IN CONFIRMING THE ADDITION O F RS.4.93 CRORES RELATING TO SHARE PREMIUM COLLECTED BY THE ASSESSEE MADE BY THE AO U/S 56(2)(VIIB) OF THE ACT. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. TH E FACTS RELATING TO THE ISSUE ARE STATED IN BRIEF. THE ASS ESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING IN GOLD BULLIONS . THE A.O. ITA NO.927/BANG/2019 M/S. MEHTA GOLD PALACE LTD., BANGALORE PAGE 2 OF 5 NOTICED THAT THE ASSESSEE HAS RECEIVED SHARE PREMIU M OF RS.5.86 CRORES DURING THE YEAR UNDER CONSIDERATION FROM FOL LOWING TWO PARTIES: (A) M/S. DIVYAM ENTERPRISES PVT. LTD. (B) M/S. HUSSAIN MURAD FASHION LLC. THE ASSESSEE HAS ALLOTTED 18,720 SHARES TO M/S. HUS SAIN MURAD FASHION LLC AT A PREMIUM OF RS.490/- PER SHARE AND COLLECTED A PREMIUM OF RS.91,72,800/-. SINCE M/S HUSSAIN MURAD FASHION LLC IS A NON-RESIDENT, THE AO DID NOT APPLY PROVISI ONS OF SECTION 56(2)(VIIB) OF THE ACT. 3. THE ASSESSEE HAS ALSO ISSUED 50000 SHARES OF RS.10/- EACH TO M/S. DIVYAM ENTERPRISES PVT. LTD. AT A PREMIUM OF R S.990/- PER SHARE AND ACCORDINGLY, COLLECTED SHARE PREMIUM OF R S.4.95 CRORES. HENCE, THE A.O. EXAMINED THE SHARE PREMIUM COLLECTE D BY THE ASSESSEE FROM M/S. DIVYAM ENTERPRISES PVT. LTD IN T ERMS OF SECTION 56(2)(VIIIB) OF THE ACT. THE ASSESSEE FURNISHED A VALUATION REPORT DATED 22.7.2015 OBTAINED FROM A CHARTERED ACCOUNTAN T NAMED SHRI ROSHAN T. MANSOOR IN SUPPORT OF THE VALUATION OF SH ARES AT RS.1,000/- PER SHARE. THE A.O. NOTICED THAT THE VA LUER SHRI ROSHAN T. MANSOOR HAS GIVEN TAX AUDIT REPORT ALSO TO THE A SSESSEE U/S 44AB OF THE ACT AND AS PER RULE 11U(A) OF THE I.T. RULES, THE VALUATION REPORT SHOULD NOT HAVE BEEN OBTAINED FROM HIM. ACCORDINGLY, THE A.O. REJECTED THE VALUATION REPORT GIVEN BY SHRI ROSHAN MANSOOR. THEN THE A.O. PROCEEDED TO COMPUTE THE VALUE OF SHARES OF THE ASSESSEE AS PER 11UA(2)(A) OF THE I.T . RULES AND DETERMINED THE VALUATION OF SHARES AT RS.12.58 PER SHARE. ACCORDINGLY, THE A.O. ASSESSED THE EXCESS PREMIUM O F RS.4,93,71,000/- AS INCOME OF THE ASSESSEE U/S 50(2 )(VIIB) OF THE ACT. ITA NO.927/BANG/2019 M/S. MEHTA GOLD PALACE LTD., BANGALORE PAGE 3 OF 5 4. IN THE APPELLATE PROCEEDINGS, LD. CIT(A) CONFIRM ED THE ADDITION BY FOLLOWING THE DECISION RENDERED BY THE COORDINATE BENCH IN THE CASES OF INNOVITI PAYMENT SOLUTIONS PVT. LTD . (ITA NO.1278/BANG/2018) AND M/S. TUV RHEINLAND NIFE ACAD EMY PVT. LTD. VS. ITO WARD 7(1)(2), BENGALURU (ITA NO.3160/B ANG/2018). AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFOR E US. 5. THE LD. A.R. SUBMITTED THAT THE ASSESSEE INITIAL LY FURNISHED THE VALUATION REPORT OBTAINED FROM SHRI ROSHAN T MA NSOOR IN IGNORANCE OF PROVISIONS OF SECTION 11U OF THE I.T. RULES. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE HAS OBTAINED ANOTHER VALUATION REPORT FROM A CHARTERED ACCOUNTANT NAMED SHRI PRASANNA ADIGA AND THE SAME WAS FURNISHE D BEFORE THE A.O. HOWEVER, NEITHER THE A.O. NOR THE CIT(A) CONS IDERED THE FRESH VALUATION REPORT FURNISHED BY THE ASSESSEE. THE LD . A.R. FURTHER SUBMITTED THAT THE LD. CIT(A) HAS PLACED RELIANCE O N THE DECISION RENDERED BY COORDINATE BENCHES IN THE CASES REFERRE D ABOVE. HOWEVER, ANOTHER COORDINATE BENCH OF ITAT HAS RENDE RED A DECISION IN THE CASE OF M/S. FUTURA BUSINESS SOLUTIONS PVT. LTD. VS. ITO (ITA NO.3404/BANG/2018), WHEREIN THE TRIBUNAL HAS FOLLOW ED THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN T HE CASE OF VODAFONE MPAISA LTD. 164 DTR 257 AND HELD THAT DCF METHOD OF VALUATION IS ALSO RECOGNISED METHOD OF VALUATION UN DER RULE 11UA. 6. WE NOTICE THAT THE VALUATION REPORT DATED 22.7.2 015 OBTAINED FROM A CHARTERED ACCOUNTANT NAMED SHRI PRASANNA ADI GA HAS NOT BEEN CONSIDERED BY THE A.O. WE ALSO NOTICE THAT TH E ACCOUNTANT HAS FOLLOWED DCF METHOD OF VALUATION FOR DETERMININ G THE VALUE OF EQUITY SHARES OF THE ASSESSEE COMPANY. SINCE THE A .O. HAS NOT EXAMINED THE ISSUE BY CONSIDERING THE VALUATION REP ORT REFERRED ABOVE, WE FEEL IT PROPER TO RESTORE THIS ISSUE TO T HE FILE OF THE A.O. FOR ITA NO.927/BANG/2019 M/S. MEHTA GOLD PALACE LTD., BANGALORE PAGE 4 OF 5 EXAMINING THE VALUATION OF EQUITY SHARES IN TERMS O F SECTION 56(2)(VIIB) OF THE ACT BY DULY CONSIDERING THE VALU ATION REPORT OF THE ASSESSEE AND ALSO TAKING INTO ACCOUNT THE DECISION RENDERED BY COORDINATE BENCH IN THE CASE OF FUTURA BUSINESS SAL ES PVT. LTD. (SUPRA). ACCORDINGLY, WE SET ASIDE THE ORDER PASSE D BY LD. CIT(A) AND RESTORE THIS ISSUE TO THE FILE OF THE A.O. AFT ER AFFORDING ADEQUATE OPPORTUNITY TO THE ASSESSEE, THE A.O. MAY TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14-8-202 0. SD/- (N.V. VASUDEVAN) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 14 TH AUG, 2020. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE. ITA NO.927/BANG/2019 M/S. MEHTA GOLD PALACE LTD., BANGALORE PAGE 5 OF 5 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. .. 14. DICTATION NOTE ENCLOSED