Methodology selected by taxpayer for determining Fair Market Value of shares: Jurisdiction of a Tax Officer to ignore/ reject such selection and valuation methods adopted by taxpayer
- During the year under consideration, the Assessee had obtained a valuation report from Chartered Accountant to the value of the shares of the Assessee wherein DCF method was recommended at Rs.527/- per share.
- However, the Assessing Officer was of the opinion that Fair Market Value method should have been applied and hence, made an addition of Rs.14.04 Crs by invoking the provisions of Section 56(2)(viib) of Income Tax Act, 1961.
- The Tribunal placed reliance on the judgment of Hon’ble Bombay High Court in the case of Vodafone M Pesa, wherein it was held that Assessing Officer can scrutinize the valuation report and he can determine a fresh valuation either by himself or by calling a determination from an independent valuer to confront the Assessee but the basis has to be DCF method and he cannot change the method of valuation which was opted by the Assessee.
- In the present case also, the Assessing Officer could not change the method of valuation from DCF method.
- Therefore, following the said judgment in case of the Assessee the matter was restored back to the file of Assessing Officer for a fresh decision with a direction that Assessing Officer should follow DCF method only and he cannot change the method opted by the Assessee.