Unnati Inorganics Pvt. Ltd. v. The Income-tax Officer, Ward-1(5), Bhavnagar
[Citation -2019-LL-0911-82]

Citation 2019-LL-0911-82
Appellant Name Unnati Inorganics Pvt. Ltd.
Respondent Name The Income-tax Officer, Ward-1(5), Bhavnagar
Court ITAT-Ahmedabad
Relevant Act Income-tax
Date of Order 11/09/2019
Assessment Year 2014-15
Judgment View Judgment
Keyword Tags scrutiny assessment • fair market value • share premium • allotment of share • issue of share • method of valuation • income from other source • immovable property • actual cost • acquisition of immovable property • book value of property • business transfer agreement • arm length basis • revaluation of asset • excess premium
Bot Summary: Bharuch, Gujarat, the FMV of which is substantially higher on the date of allotment of shares and consequently the premium charged of Rs.23/- per share is quite commensurate that the FMV of shares allotted as contemplated in Explanation below Section 56(2)(viib) of the Act. Owing to substantial increase in the underlying parcels of land acquired by the assessee company in past, it was agreed that the shares will be acquired by Luhariwala group at a negotiated price of Rs.33/- per share bearing face value of Rs.10/-. In December 2016, a Singapore based company has actually purchased 10 shares of the assessee company at a price of I T A N o. 2 4 7 4 / Ah d / 1 7 U n n a t i In o r g a n i c s P v t. Lt d. Vs. ITO A.Y. 2014-15 - 6 - approximately Rs.47/- per share. Upon negotiation with Luhariwala, a trade off was arrived at a price of Rs.33/- per share coupled with a clear understanding that Routs Voras will also infuse further funds by acquiring 1,61,000 shares each and such shares will also be issued at I T A N o. 2 4 7 4 / Ah d / 1 7 U n n a t i In o r g a n i c s P v t. Lt d. Vs. ITO A.Y. 2014-15 - 8 - the same price. The paid up share capital was further increased in the year under appeal by issuing 1,61,000 shares each to the Routs Voras and 6,94,000 shares to the Luhariwala. 6.9 Propping up its case, the learned AR for the assessee further referred to the assessment order concerning AY 2016-17 passed under s.143(3) of the Act wherein the AO disputed the allotment of fresh shares to Bharat Raut Group at Rs.46/- per share and agreed for FMV at Rs.33/- per share at which the shares were allotted to Luhariwala group. 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: Provided that this clause shall not apply where the consideration for issue of shares is received by a venture capital undertaking from a venture capital company or a venture capital fund; or by a company from a class or classes of persons as may be notified by the Central Government in this behalf.


IN INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER I.T.A. No. 2474/Ahd/2017 (Assessment Year 2014-15) Unnati Inorganics Pvt. Income-tax Ltd. Officer, Vs. Plot No.1897, Flat No. Ward-1(5), Bhavnagar 503, Panna Tarace, Nr. Rupani Circle, Bhavnagar - 364001 PAN/GIR No. AABCU1208J (Appellant) (Respondent) Appellant by Shri Narayan Atal & Shri Surya Prasad Vishwakarma, A.R. /Respondent by Shri Vinod Tanwani, Sr. D.R. / Date of 09/07/2019 Hearing /Date of 11/09/2019 Pronouncement ORDER PER PRADIP KUMAR KEDIA - AM: captioned appeal has been filed at instance of assessee against order of Commissioner of Income Tax (Appeals)-6, Ahmedabad, ( CIT(A) in short), dated 20.09.2017 arising in assessment order dated 28.12.2016 passed by Assessing Officer (AO) under s. 143(3) of Income Tax Act, 1961 (the Act) concerning AY 2014-15. I T N o . 2 4 7 4 / Ah d / 1 7 [ U n n t i In o r g n i c s P v t . Lt d . Vs. ITO] A.Y. 2014-15 - 2 - 2. solitary ground of appeal of assessee seeks to impugn action of CIT(A) in confirming addition of Rs.2,04,82,560/- to returned income by invoking provisions of Section 56(2)(viib) of Act. 3. Briefly stated, assessee, Private Limited Company, filed its return of income for AY 2013-14 in question declaring total income of Rs.Nil. In course of scrutiny assessment, AO inter alia noticed from verification of balance sheet of assessee that assessee has issued 1016000 shares having face value of Rs.10/- at premium of Rs.23/-. AO made inquiries with respect to Fair Market Value (FMV) of shares allotted having regard to provisions of Section 56(2)(viib) of Act for purposes of ascertaining correctness of premium charged. assessee in response, submitted before AO that company holds certain parcels of land at Padra Dist. Vadodara and at GIDC, Dahej Dist. Bharuch, Gujarat, FMV of which is substantially higher on date of allotment of shares and consequently premium charged of Rs.23/- per share is quite commensurate that FMV of shares allotted as contemplated in Explanation below Section 56(2)(viib) of Act. AO however disputed FMV of fresh allotment of shares sought to be demonstrated by assessee. AO eventuall y applied prescribed method of valuation as stipulated in Rule 11UA of IT Rules to determine FMV of shares. For this purpose, AO adopted book value of assets and liabilities including land as at 31.03.2013 and determined FMV of fresh allotment at Rs.12.84 per share in place of 33 per share adopted by assessee. AO accordingly held that assessee has received excess amount of Rs.2,04,82,560/- on issue of shares qua FMV as per Rule 11UA of IT Rules and added same as income from other sources in hands of assessee with reference to Section 56(2)(viib) of Act. I T N o . 2 4 7 4 / Ah d / 1 7 [ U n n t i In o r g n i c s P v t . Lt d . Vs. ITO] A.Y. 2014-15 - 3 - 4. Aggrieved by dispute raised towards FMV of shares contemplated under s.56(2)(viib) of Act, assessee preferred appeal before CIT(A). CIT(A) however also did not perceive any merit in case made out by assessee towards justification of FMV of shares at Rs.33/- per share. CIT(A) confirmed action of AO inter alia on following grounds: (a) No accounting entry has been passed in r espect of difference between Fair Mar ket Value (FMV) of t he immovable pr opert y at relevant point of time (based on jantri price) and its corresponding actual costs as reflected in books of account; (b) Since premium charged was less than what was required to be charged, if based on t he jantri price of one of underlying immovable properties, there is arbitrariness in deciding price of share at lower amount of Rs.33/-, including premi um of Rs.23/-per shar e; (c) Since Appellant initially acquired immovable property i n village Padra for setting up its plant and thereafter acquired another land at village Dahej in view of it not being in position to complete t he legal formalities vis-a-vis first property, there is element of adhocism in actions of Appellant; (d) FMV of shar e, as calculated by t he Appellant, was not substantiated by it to t he satisfaction of AO. 5. CIT(A) alleged adhocism in action of assessee and further alleged arbitrariness in determination of basis of value of land as suited to assessee. CIT(A) consequently justified basis adopted by AO for rejection of FMV determined by assessee and approved determination of FMV on basis of book value of assets and liabilities under Rule 11UA of Rules. 6. Further aggrieved by denial of relief, assessee preferred appeal before Tribunal. 6.1 learned AR for assessee submitted at outset that action of Revenue authorities is based on mis-appreciation of facts and mis-conception towards position of law. To begin with, learned AR pointed out that assessee company was originall y I T N o . 2 4 7 4 / Ah d / 1 7 [ U n n t i In o r g n i c s P v t . Lt d . Vs. ITO] A.Y. 2014-15 - 4 - promoted by members of two families namely Rauts & Voras who contributed certain funds towards initial capital for purposes of carrying on business of manufacturing of and dealing in precipitated Silica. After incorporation of company, assessee purchased two plots of adjoining land in Taluka Padra Dist. Vadodara in month of Jan. 2010. aforesaid plots of land were agricultural plots and therefore process of converting same into non agricultural one was commenced so as to utilize same for setting up manufacturing facilities thereon. However, to obviate possible delay and consumption of longer time for completion of conversion, assessee purchased another piece of industrial land at Dahej, Dist. Bharuch and activities of setting up necessar y infrastructure thereon were commenced. Since, setting of entire manufacturing facility required sizeable investment and since assessee company was owned and controlled only by two families at relevant point of time, it was considered necessary to negotiate and invite one more group to join assessee company not just b y contribution of funds towards share capital but also to join its Board of Directors. One Luhariwala Group headed by Mr. Vineet Luhariwala agreed to proposal and introduced certain funds into assessee company partly in financial year relevant to AY 2013-14 and partly in year under consideration i.e. AY 2014-15. learned AR next observed that as per broad understanding with Luhariwala group, its members agreed to purchase / apply for such number of shares so as to be holders of approximately 1/3 r d of aggregate shares of company. Owing to substantial increase in underlying parcels of land acquired by assessee company in past, it was agreed that shares will be acquired by Luhariwala group at negotiated price of Rs.33/- per share bearing face value of Rs.10/-. It was also agreed that even original promoter groups will also contribute certain additional funds into assessee company which will also be allotted at same rate. learned AR thereafter I T N o . 2 4 7 4 / Ah d / 1 7 [ U n n t i In o r g n i c s P v t . Lt d . Vs. ITO] A.Y. 2014-15 - 5 - submitted that negotiation of price with Luhariwala group was clearly based on FMV of parcels of land taken in ver y conservative way which was in fact substantially below even jantri rate declared by Government of Gujarat in so far as Dahej land was concerned. On basis of this arrangement, assessee issued 2,10,000 shares to Luhariwala group in FY 2012-13 (AY 2013-14) and further 9,06,000 shares in FY 2013-14 (AY 2014-15). All these shares were issued at premium of Rs.23 per share. assessee also issued 1,61,000 shares each in FY 2013-14 to original two groups Rauts & Voras who also subscribed shares at same rate of premium. All these transactions were carried out through proper banking channel and necessary formalities as prescribed under Companies Act, 2013 were duly complied with. Upon completion of all these formalities, share holdings of each of these three groups resulted in almost equal proportion as per initial understanding between them. 6.2 learned AR pointed out that core promoter namely Bharat Raut is IIT in Chemical Engineering with over 35 years experience in Silica, chemical product with vast array of end uses in Tyres, toothpaste, cosmetics, fertilizers, pesticides, footwears and so on. Similarly, Mr. Vineet Luhariwala who joined as co-promoter had robust marketing expertise. learned AR submitted that given solid combination of marketing expertise and technical expertise together with eminence associated with Silica project, plant at Dahej and teams capabilities, reputed company of Tata Group namely Tata Chemicals also offered for purchase of entire plant at Rs.34.20Crore whereby per share value would stand at Rs.40/- per share. However, due to certain legal obstacles proposed Tata deal could not materialize. business transfer agreement was also signed in this regard. In December 2016, Singapore based company has actually purchased 10% shares of assessee company at price of I T N o . 2 4 7 4 / Ah d / 1 7 [ U n n t i In o r g n i c s P v t . Lt d . Vs. ITO] A.Y. 2014-15 - 6 - approximately Rs.47/- per share. Reflecting confidence of giant groups in technology start up, promoters have themselves pulled in their own funds at moderate premium of Rs.23/- per share. It was pointed out that aforesaid premium is not astronomical in any manner in such technical start ups. learned AR also referred to article as published on 10.02.2017 in newspaper Hindu- Business line revealing ongoing current plans by Tata Group to invest substantial amount in plant set up by assessee company for manufacturing processed silica. 6.3 It was then submitted that AO however did not appreciate simple justification of charging premium @ Rs.23/- per share by mis- interpreting clear and unambiguous provisions of Section 56(2) of Act. learned AR adverted to Explanation to Section 56(2)(viib) of Act and submitted that FMV of shares to be adopted shall be higher of two limbs as provided in Explanation (a) to Section 56(2)(viib) of Act. It was contended that as per first limb, method of valuation as set out in Rule 11UA may be applied for determination of FMV. As per second limb, however, assessee is entitled to and is at liberty to substantiate and justif y FMV of shares based on intrinsic value of tangible and intangible assets hold by assessee company. learned AR then observed that AO ignored second limb of Explanation (a) completely. Referring to second limb, learned AR submitted that dilution of ownership of existing shareholders on account of further issue of share capital is commercially tenable only on basis of FMV of underlying assets already held by company. Therefore, Revenue Authorities have committed fatal error in not taking cognizance of intrinsic value of parcels of lands held by assessee. I T N o . 2 4 7 4 / Ah d / 1 7 [ U n n t i In o r g n i c s P v t . Lt d . Vs. ITO] A.Y. 2014-15 - 7 - 6.4 learned AR next submitted that insertion of Section 56(2)(viib) was aimed to primarily curb practice adopted earlier b y certain companies with dubious intent whereby shares were being issued at huge premium in favour of dummies who would otherwise be men of no means. Such provision is not intended to harm genuine business transactions. Rule 11UA connotes FMV of shares only with reference to book value of underlying assets and liabilities which may, at times, be at great variance in comparison to intrinsic value of assets and business capabilities prevailing at relevant point of time. It is for this reason that alternative method for arriving at FMV was embodied in Explanation (a) so as to ensure that commercial decisions legitimately taken at arm s length between parties are not adversely effected. 6.5 learned AR went on to submit that in backdrop of aforesaid submissions, it needs to be appreciated that when Routs & Voras negotiated deal with Luhariwalas , basis of arriving at FMV of shares was inter alia market value of Dahej land on which construction of factory premise was being carried out. It was proposition of Routs & Voras that jantri rate of Dahej land was fixed at Rs.3060/- per sq.mtr. b y Gujarat Government. value of Dahej land would thus translated into its FMV in vicinity of at Rs.9.18 Crore as against its actual cost of acquisition at Rs.2,31,46,397/- as incurred by assessee and consequently, reflected as book value in books of accounts. When aforestated market value is factored and substituted to book value, net worth of company would go up considerably and shares price would shoot up to nearly Rs.55/- per share i.e. far beyond negotiated price. Upon negotiation with Luhariwala, trade off was arrived at price of Rs.33/- per share coupled with clear understanding that Routs & Voras will also infuse further funds by acquiring 1,61,000 shares each and such shares will also be issued at I T N o . 2 4 7 4 / Ah d / 1 7 [ U n n t i In o r g n i c s P v t . Lt d . Vs. ITO] A.Y. 2014-15 - 8 - same price. learned AR pointed out that Vineet Luhariwala being gold medalist in chemical engineering from IIT, Rurki and very successful professional in field, existing promoters readily agreed to concede terms of arm s length basis in keeping with overall interest of business of company. 6.6 As part of above arrangement, assessee issued 2,10,000 shares to Luhariwala group in FY 2012-13 relevant to AY 2013-14. paid up share capital was further increased in year under appeal by issuing 1,61,000 shares each to Routs & Voras and 6,94,000 shares to Luhariwala. All these shares were issued to various groups at premium of Rs.23/- per share. Upon completion of this arrangement, each of three groups ended up holding almost 1/3 r d of total share capital of company. As part of this arrangement, Vineet Luhariwala was taken on Board as third Director of company and continues to hold same position thereafter. 6.7 Turning to another contention of Revenue, learned AR thereafter submitted that contention of AO as wrongly approved by CIT(A) that absence of accounting entry in relation to re-valuation of asset in books makes action of assessee for determination of FMV questionable has no substance. learned AR contended in this regard that financial accounting is pre-dominantl y historical in method and re-valuation of assets in books of accounts is not necessary at all for purposes of second limb to Explanation (a) to Section 56(2)(viib) of Act. re-valuation or otherwise, according to learned AR does not have any impact for determination of true value. learned AR referred to and relied upon decision of Supreme Court in Kedarnath Jute Manufacturing Co. Ltd. vs. CIT (1971) 82 ITR 363 (SC) for proposition that manner of entries in books of accounts would I T N o . 2 4 7 4 / Ah d / 1 7 [ U n n t i In o r g n i c s P v t . Lt d . Vs. ITO] A.Y. 2014-15 - 9 - not be decisive or conclusive in determination of true profits and absence of entries in books of accounts will not impinge upon rights of assessee in demonstrating intrinsic value. learned AR thus submitted that revenue authorities gravely misapplied position of law in facts of case. 6.8 learned AR thus contended that on recital of factual position and position of law noted above, action of AO in restricting FMV of shares artificially at Rs.12.84 and thereby subjecting differential amount of premium as subject matter of addition under s.56(2)(viib) of Act resulting into and addition of Rs.2,04,82,560/- is de hors ground realities as well as opposed to letter as well as spirit of provision introduced. 6.9 Propping up its case, learned AR for assessee further referred to assessment order concerning AY 2016-17 passed under s.143(3) of Act wherein AO disputed allotment of fresh shares to Bharat Raut Group (Janay Project & Services Pvt. Ltd.) at Rs.46/- per share and agreed for FMV at Rs.33/- per share at which shares were allotted to Luhariwala group. AO in AY 2016-17 accordingly treated Rs.13/- per share to be excess premium collected and consequently chargeable to tax under s.56(2)(viib) of Act. learned AR thus submitted that in subsequent assessment year, premium collected by assessee on subscription made by Luhariwala Group was actually endorsed. Thus, it does not lie in mouth of Revenue to take different position in preceding assessment years in total contrast to position duly taken. 6.10 Making reference to decision rendered by co-ordinate bench in Rameshwaram Strong Glass (P) Ltd. 172 ITD 571 (Jaipur Trib.) & ASG Leather (P) Ltd. 171 ITD 476 (Kolkata Trib.) learned AR sought to assert that assessee has strong case on I T N o . 2 4 7 4 / Ah d / 1 7 [ U n n t i In o r g n i c s P v t . Lt d . Vs. ITO] A.Y. 2014-15 - 10 - merits in terms of Explanation (a) (ii) to Section 56(2)(viib) of Act. learned AR submitted that CIT(A) has totally ignored and bypassed position of law in given set of facts and alleged adhocism and arbitrariness disregarding commercial exigencies and consequently alleged that action of Revenue is totally opposed to facts and vitiated in law. learned AR accordingly urged for reversal of action of AO and CIT(A). 7. learned DR for Revenue, on other hand, relied upon order of CIT(A) and submitted that assessee has fully discharged its burden of substantiation of value of assets on date of issue of shares. It was thus contended that no interference with order of CIT(A) is called for. 8. We have carefully considered rival submissions. short controversy presented before us is maintainability of additions on account of alleged excessive premium charged by assessee company towards issuance and allotment of fresh shares in light of provisions of Section 56(2)(viib) of Act. 8.1 Finance Act, 2012 inserted Section 56(2)(viib) of Act w.e.f. 1 s t April, 2013 and consequently applicable from AY 2013-14 onwards. Section 56(2)(viib) of Act imposes tax liability on company itself in respect of excessive premium collected by such company from resident subscribers of its shares. It will be thus prudent to reproduce relevant provision applicability of which is in question: "Income from other sources. 56. (1) Income of every kind which is not to be excluded from total income under this Act shall be chargeable to income-tax under head "Income from other sources", if it is not chargeable lo I T N o . 2 4 7 4 / Ah d / 1 7 [ U n n t i In o r g n i c s P v t . Lt d . Vs. ITO] A.Y. 2014-15 - 11 - income-tax under any of heads specified in section 14, items to E. (2) In particular, and without prejudice to generality of provisions of subsection (1), following incomes, shall be chargeable to income-tax under head "Income from other sources ", namely :- . (viib) where company, not being company in which public are substantially interested, receives, in any previous year, from any person being resident, any consideration for issue of shares that exceeds face value of such shares, aggregate consideration received for such shares as exceeds fair market value of shares: Provided that this clause shall not apply where consideration for issue of shares is received (i) by venture capital undertaking from venture capital company or venture capital fund; or (ii) by company from class or classes of persons as may be notified by Central Government in this behalf. Explanation. For purposes of this clause, (a) fair market value of shares shall be value (i) as may be determined in accordance with such method as may be prescribed: or (ii) as may be substantiated by company to satisfaction of th e Assessing Officer, based on value, on date of issue of shares, of its assets, including intangible assets being goodwill, know-how, parents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, whichever is higher." 8.2 perusal of Section 56(2)(viib) of Act quoted above seeks to enable determination of FMV by two methods: (i) prescribed method as purportedly embedded in Rule 11UA of Income Tax Rules and (ii) FMV based on intrinsic value of assets both tangible and intangible on date of issue of shares. Thus, FMV of all assets (tangibles, intangibles, human resources, right of management or control or other rights whatsoever in or in relation to Indian company) whether recorded in books or not, appearing in I T N o . 2 4 7 4 / Ah d / 1 7 [ U n n t i In o r g n i c s P v t . Lt d . Vs. ITO] A.Y. 2014-15 - 12 - books at their intrinsic value or not, is sufficient warrant to value premium on issue of unquoted equity shares by closely held company. Thus, Explanation (a)(ii) itself implies that book entry for recognition of intrinsic value is not necessary at all. Also, higher of value determined as per first and second limb of Explanation shall be adopted for purposes of Section 56(2)(viib) of Act. 8.3 assessee company, in instant case, seeks to take shelter of second limb of Explanation (a) to contend that book value of parcel of lands hold by assessee company requires to be replaced by intrinsic value, by virtue of which FMV would surpass negotiated premium by assessee company. 8.4 It is essentially case of assessee that intrinsic value of parcels of land allocated at Padra & Dahej are substantially higher and once book value is replaced by intrinsic value, FMV of shares allotted would be far higher than negotiated price. At this stage, we notice from assessment order that calculation of premium has been made by assessee in para 3.1 whereby share premium eligible to assessee was worked out to Rs.22.34 per share (say to Rs.23/-) on substitution of book value of land by value as per valuation report. It is case of assessee that value of Dahej land has been taken at 45% of jantri value only whereas if full amount as per jantri value is adopted, valuation would be more than double of present valuation. In circumstances, it is case of assessee that higher FMV as per second limb to Explanation is duly substantiated by valuation report and action of CIT(A) in confirming order of AO is marred b y mis-conception of law and facts. It is further case of assessee that cursory observation of adhocism and arbitrariness by first appellate authority can be no ground to depart from ostensible I T N o . 2 4 7 4 / Ah d / 1 7 [ U n n t i In o r g n i c s P v t . Lt d . Vs. ITO] A.Y. 2014-15 - 13 - factual position. market value of land prevailing at time of issue of shares requires to be substituted which value is dul y supported by valuation report obtained in this regard. Such valuation report has not been successfully controverted by Revenue. 8.5 As narrated in preceding paras, limited question that arises for consideration is whether value of land parcels adopted by assessee as per valuation report requires to be taken cognizance of for purposes of Section 56(2)(viia) of Act or not. At this juncture, we observe that one of grounds taken for rejecting basis of determination of FMV is that no accounting entry has been passed in respect of difference between FMV of immovable property at relevant point of time in books of accounts. As observed in earlier paras, we do not see any merit in this line of reasoning adopted by lower authorities. It is well settled that even where assessee fails to make necessary entries in books of accounts, it will not operate as bar for claiming benefits by way of deduction etc. as was held by Hon ble Supreme Court in case of Kedarnath Jute Manufacturing Co. Ltd. vs. CIT (1971) 82 ITR 363 (SC). Secondly, second limb of Explanation (a) itself provides for determination of FMV based on value of underlying assets. As corollary, value once substantiated would be replaced with book value for purposes of FMV regardless of book entries in this regard. This basis adopted by lower authorities therefore does not hold any water. 8.6 We now advert to another allegation made by CIT(A) that action of assessee company is marred by adhocism and beset with arbitrariness. CIT(A) has observed that project was ultimately set up at Dahej despite acquisition of land at Padra which defies logic and gives impression of adhocism. We fail to I T N o . 2 4 7 4 / Ah d / 1 7 [ U n n t i In o r g n i c s P v t . Lt d . Vs. ITO] A.Y. 2014-15 - 14 - understand purport of such observation for determination of FMV. intrinsic valuation of land as sought to be demonstrated by assessee was required to be looked into to give effect to Explanation (a) below Section 56(2)(viib) of Act. manner in which assessee was required to run its business is totally within domain of assessee and has no bearing on applicability of Section 56(2)(viib) of Act. We are also unable to see substance in allegation of arbitrariness in conduct of assessee. What assessee has attempted to demonstrate that market value of Padra land and 45% of jantri value of Dahej land itself is sufficient to justif y premium collected. By stating so, assessee merely seeks to justif y bonafides of premium based on value of land. assessee has also attempted to narrate circumstances for unison of existing promoters group (Rauts & Voras) and incoming group (Luhariwala). valuation got done after issue of shares is really of no consequence. What is relevant is whether at time of allotment of shares, value of shares as claimed existed or not! valuation report is not evidence in itself but merely opinion of independent having regard to totality of expert facts and circumstances existing on date of valuation. So long as facts and circumstances exist, presence or otherwise valuation report per se has no effect. Both lower authorities have failed to controvert value adopted for land parcels in departure with book value. No rebuttal of fact towards value is on record. Revenue authorities are clearly guided by irrelevant consideration while holding against assessee. AO himself in subsequent year has disputed higher valuation of Rs.46/- and unequivocall y adopted Rs.33/- as fair value. assessee has also been able to demonstrate arm s length transaction and unison of two different groups bringing different capabilities and expertise for furtherance of business. peripheral evidences in form of interest shown by giant groups like Tata are significant and underlie bonafides in I T N o . 2 4 7 4 / Ah d / 1 7 [ U n n t i In o r g n i c s P v t . Lt d . Vs. ITO] A.Y. 2014-15 - 15 - fair valuation for issuance of fresh shares. There is another overwhelming factor subsisting in case to justif y fair value. existing promoters have also subscribed at rate similar to rate at which shares were allotted to Luhariwala Group which further reinforces inherent strength in valuations of company as represented by value of equity shares. We thus see no valid reason whatsoever in upholding adverse conclusion drawn by Revenue Authorities. order of CIT(A) accordingly set aside and AO is directed to delete addition made under s.56(2)(viib) of Act discussed above. 9. In result, appeal filed by assessee is allowed. This Order pronounced in Open Court on 11/09/2019 Sd/- Sd/- (MAHAVIR PRASAD) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad Dated 11/09/2019 True Copy S. K. SINHA Copy of Order Forwarded to 1. Revenue 2. Assessee 3. Concerned CIT 4. , CIT (A) 5.DR, ITAT, Ahmedabad 6. 9 / Guard file. By order Unnati Inorganics Pvt. Ltd. v. Income-tax Officer, Ward-1(5), Bhavnagar
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