‘Valuation’ and ‘FMV’ of shares for computation of capital gain are admissible issues before AAR

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‘Valuation’ and ‘FMV’ of shares for computation of capital gain are admissible issues before AAR

Alliance Data Lux Financing S.A.R.L., In re – [2021] 124 taxmann.com 457 (AAR – New Delhi)
Short Overview of the Case:
Assessee applied for an advance ruling before the Authority for Advance Ruling (AAR).
Department objected to the admission of application on the ground that it involves the determination of fair market value (FMV) of property and transaction was prima-facie for the avoidance of tax.
Assessee submitted that the objections raised by the department were not justified as none of the questions raised in the application involved any sort of fair value computation.
 It further submitted that the ruling was requested on the issue of whether transfer under consideration will result in capital gain liability under the provisions of Income-tax and DTAA.
 Admission of application could not be objected on the mere ground that the concept of valuation was embedded in question relating to capital gain tax liability.
AAR held that no issue of valuation was involved in the questions raised in the application filed by assessee.
The concept of valuation was inherently embedded in the question of capital gains. The question which was required to be answered was whether assessee is liable for capital gains tax.
 It was only the question of the principle of taxability and not the mechanism for computation of capital gains. Issue of valuation or FMV is relevant for computation of capital gains.
Assessing Officer will be free to determine the FMV of property in case it is held that assessee is liable to pay capital gains tax.
Thus, merely because the concept of valuation was embedded in question relating to capital gain tax liability, the application filed by assessee could not be held to be barred under provisions of Section 245R.
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