MIM COMPONENTS BANGALORE PRIVATE LIMITED,BANGALORE V. INCOME-TAX OFFICER, WARD-4(1)(3), BANGALORE

MA 55/BANG/2024

AI Insights

The case involves M/s. Mim Components Bangalore Pvt. Ltd., the appellant, who filed a miscellaneous application seeking rectification of an earlier Tribunal order concerning the valuation of shares issued to M/s. Bharat Conductors Pvt. Ltd. The original dispute centered on whether the valuation adopted by the assessee for the shares was correct and compliant with section 56(2)(vii)(b) of the Income Tax Act. The Tribunal had previously remitted the issue back to the Assessing Officer (AO) for a re-evaluation, providing the assessee another opportunity to justify the share valuation with acceptable evidence. In the miscellaneous application, the assessee argued that the source of the funds used for the share purchase was not unaccounted money, which should exempt them from the provisions of section 56(2)(vii)(b). However, the Tribunal found no basis to accept this argument as the law clearly stipulates the conditions under which the fair market value of shares should be assessed, irrespective of the source of funds.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 669110 (ITAT-BANGALORE)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 24-06-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUBRAMANIAN S
• Assessee Lawyers: RAVISH RAO
• Keywords: Fair market value; Valuation report
• Section: 56; 56(2)(vii)(b)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH : BANGALORE BEFORE SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER M.A. No. 55/Bang/2024 (in ITA No. 683/Bang/2024) Assessment Year : 2016-17 M/s. Mim Components Bangalore Pvt. Ltd., Plot Nos. 395 & 396, Sub-Layout, Sompura Industrial Area, 1st Stage, Near Dabaspet, Nagamangala Taluk – 562 132. PAN: AAGCM3281Q Vs. The Income Tax Officer, Ward – 4 (1) (3), Bangalore. APPELLANT RESPONDENT Assessee by : Shri Ravish Rao, CA Revenue by : Shri Subramanian .S, JCIT-DR Date of Hearing : 14-02-2025 Date of Pronouncement : 24-06-2025 ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER This is a miscellaneous application filed by the assessee u/s. 254(2) of the Act to rectify the order passed by this Tribunal in ITA No. 683/Bang/2024 dated 08/08/2024. Page 2 of 3 M.A. No. 55/Bang/2024 (in ITA No. 683/Bang/2024) 2. In the above said application, the assessee submitted that the question of the applicability of section 56(1) & (2) of the Act, when the source of money invested was not unaccounted money, was not decided by this Tribunal. 3. We have perused the order of this Tribunal and the Tribunal had discussed about the valuation of shares allotted to M/s. Bharat Conductors Pvt. Ltd. as per section 56(2)(vii)(b) of the Act. The AO had not accepted the valuation fixed by the assessee for which he gave various reasons. Before this Tribunal, the assessee had submitted that the valuation adopted by the assessee is correct and requires no reconsideration. In support of the contention made by the assessee, the assessee had not furnished any acceptable valuation report with the corroborated material evidences and therefore this Tribunal had remitted the issue to the AO to provide another opportunity to the assessee to justify the valuation of the share given to M/s. Bharat Conductors Pvt. Ltd. 4. We have also perused provision 56(2)(vii)(b) and the relevant Rule 11U and 11UA of the I.T.Rules. In the provision 56(2)(vii)(b), there is no such wordings incorporated in it to accept the submission made by the assessee. The section merely says that if a company receives any consideration from any person for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeded the fair market value of the shares should be subjected to tax u/s. 56 of the Act. The provision also explained how the fair market value of the share should be arrived. Similarly, Rule 11UAC(B) of the Income Tax Rules speaks about the method of arriving the fair market value. Nowhere, it is mentioned that the provision 56(2)(vii)(b) could not be applicable if the source of the fund paid by the person is not from the unaccounted money. Page 3 of 3 M.A. No. 55/Bang/2024 (in ITA No. 683/Bang/2024) 5. In such circumstances, we do not find any error or mistake in the order passed by this Tribunal. We, therefore, dismiss the application filed by the assessee u/s 254(2) of the Act. 6. In the result, the miscellaneous application filed by the assessee is dismissed. Order pronounced in the open court on 24th June, 2025. Sd/- Sd/- (LAXMI PRASAD SAHU) (SOUNDARARAJAN K.) Accountant Member Judicial Member Bangalore, Dated, the 24th June, 2025. /MS / Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file 6. CIT(A) By order Assistant Registrar, ITAT, Bangalore "