Adopting the circle rate of the property is a violation of 56(2)(viib), the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the order of CIT(A)which deleted the addition of Rs.2,95,23,400/ made by the AO.
Malibu Estate Dispensary Pvt. Ltd, the assessee company is undertakingthe construction of a dispensary/ hospital at Gurgaon. The assessee introduced share capital/ share premium in respect of a total number of shares allotted at 152816 with a face value of Rs.1428160/- and premium of Rs.69979840/-. The share premium was @ 490 per share.
The AO viewed that the NAV of shares was Rs. 10 as per rule 11 UA of the IT Rules as per book value of assets and liabilities as of 31.03.2015. The assessee filed a detailed reply and supported its claim with a valuation report from a registered valuer and a certificate from the CA in respect of the valuation. The AO found that the stamp dutyrate was Rs. 30,000/- per square yard and adopting the same the AO computed the addition on account of the excess share premium received at Rs.29562912/-.
On appeal, the CIT(A)held that the AO was required to adopt the fair market value of the property as provided by the appellant and deleted the addition of Rs.2,95,23,400/ made by the AO.
A Coram of Sh. N K Billaiya, accountant member and Sh. Anubhav Sharma, a judicial member observed that as per the explanation to section 56 (2)(viib) of the Act, the fair market value of the shares shall be based on (1) the value determined under rule 11UA or (2) fair market value of the underlying assets whichever is higher.
The Tribunal observed that the AO erred in adopting the circle rate of the property and upheld the findings of the CIT(A). The appeal filed by the revenue got dismissed.
Sh. Jeetendra Chand appeared for the appellant and Sh. Sushil Wadhwa appeared for the respondent.
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