Nelumbo Paints Pvt. Ltd., Haryana vs Ito Ward 2(1), Haryana on 20 June, 2023
33. Section 56(2) (viib) is a deeming provision and one cannot
expand the meaning of scope of any word while interpreting such
deeming provision. If the statute provides that the valuation has to
be done as per the prescribed method and if one of the prescribed
methods has been adopted by the assessee, then Assessing Officer
has to accept the same and in case he is not satisfied, then we do
18 ITA No. 85/Del/2021
Nelumbo Paints Pvt. Ltd. Vs. ITO
not we find any express provision under the Act or rules, where
Assessing Officer can adopt his own valuation in DCF method or get
it valued by some different Valuer. There has to be some enabling
provision under the Rule or the Act where Assessing Officer has
been given a power to tinker with the valuation report obtained by
an independent valuer as per the qualification given in the Rule 11U.
Here, in this case, Assessing Officer has tinkered with DCF
methodology and rejected by comparing the projections with actual
figures. The Rules provide for two valuation methodologies, one is
assets based NAV method which is based on actual numbers as per
latest audited financials of the assessee company. Whereas in a
DCF method, the value is based on estimated future projection.
These projections are based on various factors and projections made
by the management and the Valuer, like growth of the company,
economic/market conditions, business conditions, expected demand
and supply, cost of capital and host of other factors. These factors
are considered based on some reasonable approach and they
cannot be evaluated purely based on arithmetical precision as value
is always worked out based on approximation and catena of
underline facts and assumptions. Nevertheless, at the time when
valuation is made, it is based on reflections of the potential value of
business at that particular time and also keeping in mind underline
factors that may change over the period of time and thus, the value
which is relevant today may not be relevant after certain period of
time. Precisely, these factors have been judicially appreciated in
various judgments some of which have been relied upon by the ld.
Counsel, for instance: -