Principal Commissioner Of Income Tax, Delhi 1 v. M/S Ansal Condominium Pvt Ltd

$~64 * IN THE HIGH COURT OF DELHI AT NEW DELHI+ ITA 132/2024 & CM APPL. 11068/2024 (delay) PRINCIPAL COMMISSIONER OF INCOME TAX, DELHI 1 ..... Appellant Through: Mr. Prashant Meharchandani, SSC with Mr. Akshat Singh, Ms. Ritika Vohra, Mr.Utkarsh Kandpal, Advs. versus M/S ANSAL CONDOMINIUM PVT LTD ..... Respondent Through: Mr. Tapas Ram Mishra, Adv. CORAM:HON'BLE MR. JUSTICE YASHWANT VARMAHON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV O R D E R % 27.02.2024 1.The Commissioner impugns the order dated 16 June 2023 passed by the Income Tax Appellate Tribunal [“ITAT”] and has proposed the following questions for our consideration:- “A) Whether on the facts and circumstances of the case and in law, Hon'ble ITAT is correct in deleting the addition of Rs.24,01,57,001/- made by the AO u/s 56(2)(viia) of the IT Act, 1961 on account of difference in valuation of shares as per book value and the value adopted as per DCF method? B) Whether on the facts and circumstances of the case and in law, Hon'ble ITAT is correct in ignoring the fact that the AO has brought out the discrepancies in the valuation of shares as per the Discounted Free Cash Flow (DCF) method followed by the assessee? C) Whether on the facts and circumstances of the case and in law, Hon'ble ITAT is correct in not appreciating the fact that the CA who issued valuation report of shares appears to be not based on reasonable judgment as mandated by ICAI? D) Whether on the facts and circumstances of the case and in law, Hon'ble ITAT is erroneous and not tenable in law and on facts.? E) The appellant craves leave to add, alter or amend any substantial question of law raised above at the time of the hearing.?” 2. 2.We note that the principal argument which appears to have been addressed was in respect of the additions sought to be made and referable to Section 56(2)(viia) of the Income Tax Act, 1961 [“Act”]. While dealing with the aforesaid, the Commissioner of Income Tax, Appeals [“CIT(A)”] has rendered the following findings:- D) Whether on the facts and circumstances of the case and in law, Hon'ble ITAT is erroneous and not tenable in law and on facts.? E) The appellant craves leave to add, alter or amend any substantial question of law raised above at the time of the hearing.?” 2. 2.We note that the principal argument which appears to have been addressed was in respect of the additions sought to be made and referable to Section 56(2)(viia) of the Income Tax Act, 1961 [“Act”]. While dealing with the aforesaid, the Commissioner of Income Tax, Appeals [“CIT(A)”] has rendered the following findings:- “6.4.7From the Memorandum explaining the insertion of ·Section56(2)(viia) and amendment of section 56(2)(vii) of the Act, it is-evident that both the provisions are to counter evasion of tax byway of transfer of property either without consideration orinadequate consideration. A combined reading of the provisions ofsection 56(2)(viia) and the Memorandum explaining the provisionsshows that the provision of section 56(2)(viia) would be attractedin the case of a recipient firm or company which receives theshares of a company without any consideration or for aconsideration which is less than the aggregate fair market value ofthe shares by an amount exceeding fifty thousand rupees.In the instant case, the appellant has purchased shares and CCCPS of Ansal Township from IIRF India Realty II Ltd and IFIN Realty Trust @Rs.2777/- as against the book value / FMV of Rs.815.59. It has been held by the AO. that since the difference (Rs.1961.41) cannot be added in the hands of the seller i.e. IIRF India Realty II Ltd, therefore, the addition has to be made in the hands of the appellant. In making the addition, the AO has referred to certain Circulars/Notifications issued by RBI. The appellant has purchased the shares and CCCPS from IIRF India Realty II Limited, wholly owned subsidiary of IL&FS India Realty Fund II LLC ('the Foreign investor') and IL&FS Trust Company Ltd ('the Indian investor') at a price higher than the fair market value of the shares and CCCPS. The Ld. A.R. has explained that the price at which shares and CCCPS have been purchased are less than what was agreed by the agreement dated 2.4.2008 and 20.5.2010 and the commercial expediency of the business cannot be doubted in the said transaction of purchase of shares and CCCPS by the appellant company. Considering the facts of the case, I am of the opinionthat the provisions of section 56(2)(viia) are not attracted in theinstant case. Accordingly, I hold that the AO is not justified inmaking the addition of Rs.24,01,57,001/- in the case of the appellant company and the addition of Rs.24,01,57,001/- is deleted.This ground of appeal is allowed.” 3.It is the aforesaid view which has been affirmed by the ITAT. Bearing in mind the conclusions and facts which have been recorded by both the CIT(A) as well as the ITAT, we find that the appeal raises no substantial question of law. 4.The appeal shall consequently stand dismissed along with pending application. YASHWANT VARMA, J. PURUSHAINDRA KUMAR KAURAV, J.FEBRUARY 27, 2024/neha