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2. The Ld. CIT(A) has erred in ignoring the AO's finding that the assessee failed to produce supporting evidence to substantiate the method of valuation adopted by him.
3. The Ld. CIT(A) has erred in ignoring the fact that the AO had specifically asked the assessee to file supporting evidence with regard to "Discounted cash flow" method adopted to value shares, vide order sheet entry dated 17.03.16, which is a specific show cause in this respect, to which the assessee file no explanation.
4. The Ld. CIT(A) has erred in accepting the "Discounted cash flow" method for valuation of share, without any empirical basis to support the same.

P a g e |2 M/s Enterprises Business Solutions. Vs. ACIT, Central Circle-2

5. It is prayed that the order of the Ld. CIT(A) be set-aside and that of the Assessing Officer restored.

4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) in the course of the proceedings before him observed that Rule 11UA provided for determination of the fair market value of unquoted shares based on the 'book value' or the value determined by a merchant banker or an accountant as per the discounted cash flow method, at the option of the assessee. It was observed by the CIT(A) that the A.O had applied the 'book value' method whereas the assessee company had exercised the option of valuing the shares based on 'discounted cash flow method', which was supported with a report from an accountant. Interestingly, it was observed by the CIT(A) that the issue was also examined in the course of the assessment proceedings in the case of the assessee for the immediately succeeding year i.e. A.Y 2014-15, wherein too the shares were issued by the assessee at a premium of Rs. 140/- per share, which alongwith the method of valuation of the shares as per 'discounted cash flow method' was accepted by the A.O. It was observed by the CIT(A) that an option was available to the assessee under Rule 11UA of the I.T. Rules to issue shares at a premium which was to be worked out on the basis of either of the two methods therein prescribed viz. (i) the book value method; or (ii) discounted cash flow method. Apart there from, it was observed by the CIT(A) that now P a g e |4 M/s Enterprises Business Solutions. Vs. ACIT, Central Circle-2 when the method adopted by the assessee was accepted by the A.O in the immediately succeeding year i.e. A.Y 2014-15, therefore, there was no justification on his part in adopting an inconsistent view and treating the share premium of Rs. 2,80,00,000/- as the income of the assessee for the year under consideration. On the basis of his aforesaid deliberations the CIT(A) finding merit in the appeal of the assessee deleted the addition of Rs. 2,80,00,000/- made by the A.O.

P a g e |5 M/s Enterprises Business Solutions. Vs. ACIT, Central Circle-2

7. We have deliberated at length and have given a thoughtful consideration to the issue before us. As per Section 56(2)(viib) of the IT Act, where a company, not being a company in which the public are substantially interested, receives in any previous year from any person being a resident any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be chargeable to income tax under head "Income from other sources". As per the Explanation to section 56(2)(viib) of the IT Act, the FMV of the shares shall be the value as may be determined in accordance with the method envisaged in Rule 11UA of the Income tax Rules, 1962 or as may be substantiated by the company to the satisfaction of the AO, based on the value on the date of issue of shares of its assets, including intangible assets being goodwill, know how, patents, copyrights, trademarks, licenses, franchises or any other business or commercial rights of similar nature, whichever is higher. In the case before us the shares had been issued by the assessee at a premium of Rs. 140/- per share. Admittedly, the value of the shares was determined by the assessee as per the "discounted cash flow method". In so far the adoption of the discounted cash flow method for valuation of shares by the assessee is concerned, we find that the same has been accepted by the A.O while framing the assessment under Sec. 143(3) in the case of the assessee for the immediately succeeding year i.e. A.Y 2014-15, wherein too the shares had been issued at a premium of Rs. 140/- per share.