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AO cannot adopt NAV method to determine value of shares of a company if assessee used DCF method for the same

October 17, 2020[2020] 120 238 (Bangalore - Trib.)

INCOME TAX : Assessing Officer should scrutinize valuation report prepared under DCF method and if necessary, he can carry out fresh valuation either by himself or by calling a final determination from an independent valuer to confront assessee; he cannot change method of valuation and he has to follow DCF method only

• Where assessee-company, engaged in business of manufacturing of energy drinks, had issued shares at a share premium, but Assessing Officer took view that share valuation under DCF method had been carried out on basis of projections and estimations given by management and that value of share should be based on 'net Asset Method' mentioned in rule 11UA and accordingly, Assessing Officer worked out value of shares under Net Asset Method and assessed excess share premium as income of assessee under head 'income from other sources' under section 56(2)(viib), since Assessing Officer had proceeded to determine value of shares by adopting different method without scrutinizing valuation report furnished by assessee under DCF method, matter be remanded to file of Assessing Officer with direction to examine said issue afresh.
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