The Assessee Has The Option To Determine The Fair Market Value Of Shares Either Under The DCF Method Or The NAV Method: ITAT Mumbai

The Assessee Has The Option To Determine The Fair Market Value Of Shares Either Under The DCF Method Or The NAV Method: ITAT Mumbai

In the case of Narang Access Pvt. Ltd vs DCIT, ITAT Mumbai has held that:

While valuing the share premium and to determine the fair market value of shares in terms of section 56(2)(viib) of the Act, the assessee has option for adoption of valuation method and the basis of valuation has to be DCF method. The Hon’ble Bombay High court in Vodafone M-Pesa Ltd vs. PCIT [2018] 92 taxmann.com 73 (Bombay) has held that in view of the Income Tax Rules, the method of valuation namely NAV method or DCF Method to determine the fair market value of share in terms of section 56(2)(viib) of the Act has to be done or adopted at the assessee’s option. AO was undoubtedly entitled to scrutinize the valuation report and can tinker or determine a fresh valuation after confronting the assessee. However, the basis of valuation had to be DCF method and it is not open to the AO to change the method of valuation which the assessee has duly opted.

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Dhanraj Sharma

Dhanraj Sharma is CEO of Tax Concept. He is on a Mission to Educate and Empower 10,000+ Professionals across the Country.

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