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(NAV) method. During the course of assessment proceedings, the A.O. noticed that the value of shares adopted for the subsidiary company did not match with the Balance Sheet.

Therefore, the AR was asked to submit the details of valuation of the shares issued and justify why the share premium received should not be taxed under income from other sources, in view of section 56(2)(viib) of the I.T. Act. The assessee filed written submissions on 13.12.2018 submitting the details and stated that shares issued during the year have been valued under DCF method and Net Asset Value method. The A.O. was of the view that the assessee cannot pick and M/s GMR Enterprises Private Limited.

As in the present case also the assessing officer not satisfied with the valuation of the share and further assessing officer calculated as below the share value based on the Net Asset Method second method mention in Income tax rules. The detail calculation/working under Net Asset Value method is as under:

The Fair Market Value as per Rule 11 UA would be: [(A-L) /(PE)] x (PV) Where, --
A= book value of the assets in the balance-sheet as reduced by any amount of tax paid asdeduction 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 unamortized amount of deferred expenditure which does not M/s GMR Enterprises Private Limited.
7.18 It will be seen from the above that when the consistent valuation method of book value is substituted then the share value stands at Rs.2,26,996/-. However, there is nothing brought on record to evidence the fact that this value was the book value as on date of issue of shares. Further, it will be seen that the NAV arrived at as at 30.09.2014 stands at Rs.18.68 which in any case could not have reached astronomical figure of Rs.2,26,996 in any case within a span of months. This also evidence the fact that when the book value is consistently adopted the other figures have been incorporated in a manner to inflate the value of the premium while the market value of the share of the subsidiary is adopted as red herring to bring the premium to the level of management desires. Thus, the valuation report has virtually no legs to stand on as it stands proven that what is stated to be book value also in fact is not the book value. The entire accountant's report thus stands discredited and hence, the Net asset value method is adopted to arrive at the excess premium as worked out at para 7.14 hereinabove.

per share. Paragraph 4 of the valuation report discusses about the valuation methodology followed. The CA has determined the value under "Discounted Free Cash Flow Method (DCF) at Rs.13,246/- per share.

(b) Following observation made by the valuer is relevant here:-

"As the Discounted Free Cash Flows are based on projections, we strongly believe that the same should be corroborated with another method of valuation, accordingly the fair value arrived under DFCF method is corroborated with valuation as per Net Asset Value Method."