It relies upon ‘Technical guide on Share valuation’ by  ICAI Research Committee, holds that cash flow projections should reflect “the best estimates of the management and take into account various macro and micro economic factors affecting the business”; 

 

Holds that if assessee cannot establish that projections are reliable estimate achievable with reasonable certainty, “the same cannot be recognized and if the future cash flow cannot be recognized then the DCF method is not workable”, draws analogy from SC decision in Bharat Earth Movers and Rotork Control India in context of contingent liability and provisions; 

 

Further relying on Bombay HC ruling in M-Pesa Ltd and ITAT ruling in Rameshwaram Strong Glass (P) Ltd., holds that AO can scrutinize valuation report and if he is not satisfied with assessee’s explanation, he can go for own valuation or obtain fresh valuation report from independent valuer after recording reasons, but he cannot change valuation method adopted by assessee; 

 

Remits matter to AO with direction to scrutinize valuation report based on facts and data available on the date of valuation, clarifies that actual result of future cannot be basis to decide about reliability of the projections; 

 

Also states that in assessee’s case past data is available for making projections, however clarifies that in case of start-ups where past data is not available, the projections may be based on expectations and thus in such cases “it should be shown that such expectations are reasonable after considering various macro and micro economic factors affecting the business”:ITAT