AO couldn’t change method of determining FMV of shares consistently accepted in prior years

[2019] 104 taxmann.com 362 (Amritsar – Trib.)

IT: Where assessee-company had been consistently determining fair market value of shares as per ‘Discounted Cash Flow’ method which was accepted by revenue, Assessing Officer was unjustified in adopting ‘Book Value’ method in current year; addition on account of premium on issue of share, thus made, was to be deleted

Section 56 of the Income-tax Act, 1961, read with rule 11UA of the Income-Tax Rules, 1962 – Income from other sources – Chargeable as (Share premium) – Assessment year 2013-14 – Assessee-company issued shares at a premium of Rs. 140 per share for face value of Rs. 10 each share – It received Rs. 2.8 crores as share premium – Assessee determined Fair Market Value (FMV) of shares as per ‘Discounted Cash Flow’ method (DCF) – Assessing Officer applied ‘Book value’ method and computed value of shares of assessee at Rs. 2.36 and ‘nil’ on 1-4-2012 and 31-3-2013, respectively – Assessing Officer concluded that share premium of Rs. 2.80 crores received by assessee-company was taxable – However, for immediately succeeding year viz., assessment year 2014-15 revenue itself had accepted DCF method of valuation of shares – Whether in absence of any distinguishing facts, revenue could not have whimsically declined to accept method of valuation of shares for year under consideration; and Assessing Officer was incorrect in adopting an inconsistent approach of valuation – Held, yes – Whether Commissioner (Appeals) had rightly deleted addition of Rs. 2.8 crores made by Assessing Officer – Held, yes

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