The Assessing Officer has applied rule 11UA to my unquoted shares and arrived at a figure the shares could never have fetched. Can a contemporaneous auction price be adopted instead for section 50CA?
Yes, on this decision - and it can cut against you as well as for you. The Chennai Bench held that a valuation determined by the insolvency resolution professional in auction proceedings conducted under judicial supervision carries substantial evidentiary value and cannot be brushed aside without cogent material. It adopted Rs 3.59 per share, the price discovered in the auction supervised by the National Company Law Tribunal, as the fair market value for section 50CA, in place of both the officer's rule 11UA figure of Rs 104.917 and the assessee's declared consideration of Rs 2.40. It also held that assets the assessee never beneficially owned cannot be loaded into the valuation.
Decided by the ITAT (Income Tax Appellate Tribunal, Chennai Bench - Shri George George K, Vice President and Shri S.R. Raghunatha, Accountant Member) on 2026-05-22, reported as [2026] 187 taxmann.com 12 (Chennai - Trib.); IT Appeal No. 3332 (CHNY) of 2025. It bears on section 50CA of the Income Tax Act 1961, in Capital Gains matters.
Section 50CA substitutes a rule-driven fair market value for the actual consideration on a transfer of unquoted shares, and the rule works off the balance sheet. Where the company is distressed, the balance sheet carries assets that will never be realised and assets whose proceeds belong to somebody else, and the mechanical result can be a figure many times what anybody would pay. This decision gives two answers to that. First, a price discovered in an auction under the supervision of the National Company Law Tribunal is real evidence of value and displaces the arithmetic unless the department can meet it with something cogent. Second, the computation itself can be corrected: assets whose realisation can never enure to the assessee's benefit are not to be included merely because they appear in the balance sheet. The warning is that the Bench took the auction price both ways, raising the consideration above what the assessee had declared.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee had acquired 1,25,66,185 unquoted equity shares of Cethar Energy Limited in an e-auction conducted under the supervision of the National Company Law Tribunal at Rs 3.59 per share, a total of about Rs 4.51 crore. In the previous year relevant to assessment year 2020-21 she transferred 20,87,400 of those shares to one T.P. Pradeep Raj for Rs 50 lakh, that is at Rs 2.40 per share, and returned a capital loss of Rs 24,93,766. The Assessing Officer applied section 50CA and computed the fair market value of the shares under rule 11UA from the figures in the company's balance sheet, arriving at Rs 104.917 per share. Substituting that figure for the consideration, he assessed a deemed short-term capital gain of about Rs 21.15 crore. The assessee's case was that the company was in distress, that the insolvency resolution professional had left out roughly Rs 125 crore of unrealisable assets when fixing the reserve price for the auction, and that under the share purchase agreement the proceeds of certain assets had to be handed over to the liquidator, so she never had the benefit of them.
The appeal was partly allowed and the order of the Commissioner (Appeals) was modified. The Tribunal held that the valuation determined by the insolvency resolution professional pursuant to auction proceedings conducted under judicial supervision carries substantial evidentiary value and cannot be brushed aside without cogent material. It held that the fair market value for the purposes of section 50CA deserved to be reasonably adopted at Rs 3.59 per share, being the price discovered in the auction supervised by the National Company Law Tribunal, and directed the Assessing Officer to recompute the capital gains on that figure in place of Rs 104.917 per share. On the rule 11UA computation itself, it held that assets whose realisation can never enure to the benefit of the assessee cannot be artificially loaded into the valuation mechanism merely because they continue to appear in the balance sheet, noting that clause 3.2.1 of the share purchase agreement required the proceeds of certain assets to be handed to the liquidator, so that the assessee never acquired beneficial ownership over them.
The Tribunal treated section 50CA as a provision that fixes on fair market value, with rule 11UA supplying a method of arriving at it, and asked what the best evidence of that value was on the facts. Its answer had two parts. The first was about the quality of the auction price. An e-auction held under the supervision of the National Company Law Tribunal, in which a resolution professional fixes the reserve price after excluding what cannot be realised, is a process with judicial oversight in which a price is actually discovered in the market. That, the Tribunal held, is evidence of substantial weight, and the department could not displace it by simply preferring an arithmetical figure; it had to bring cogent material. Since the auction was close in time to the transfer and concerned the very shares in question, the price it produced was the sounder measure. The second part went to the inputs of the rule itself. A book value computation assumes that the assets in the balance sheet belong to the company for the benefit of its shareholders. Where the resolution documents provide that the proceeds of particular assets go to the liquidator, the assessee never had the beneficial ownership, and to include them is to value something she did not get; the same applies to assets that cannot be realised at all. On both counts, Rs 104.917 per share did not represent fair market value. The Tribunal, however, did not accept the declared Rs 2.40 either, since the assessee's own contemporaneous acquisition price in the same auction was Rs 3.59.
The valuation determined by the Insolvency Resolution Professional pursuant to auction proceedings conducted under judicial supervision carries substantial evidentiary value and cannot be brushed aside without cogent material.
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Handle my notice → Ask a CA on WhatsAppYes, on this decision - and it can cut against you as well as for you. The Chennai Bench held that a valuation determined by the insolvency resolution professional in auction proceedings conducted under judicial supervision carries substantial evidentiary value and cannot be brushed aside without cogent material. It adopted Rs 3.59 per share, the price discovered in the auction supervised by the National Company Law Tribunal, as the fair market value for section 50CA, in place of both the officer's rule 11UA figure of Rs 104.917 and the assessee's declared consideration of Rs 2.40. It also held that assets the assessee never beneficially owned cannot be loaded into the valuation. This was decided by the ITAT (Income Tax Appellate Tribunal, Chennai Bench - Shri George George K, Vice President and Shri S.R. Raghunatha, Accountant Member) and bears on section 50CA of the Income Tax Act 1961. It is reported as [2026] 187 taxmann.com 12 (Chennai - Trib.); IT Appeal No. 3332 (CHNY) of 2025. Section 50CA substitutes a rule-driven fair market value for the actual consideration on a transfer of unquoted shares, and the rule works off the balance sheet. Where the company is distressed, the balance sheet carries assets that will never be realised and assets whose proceeds belong to somebody else, and the mechanical result can be a figure many times what anybody would pay. This decision gives two answers to that. First, a price discovered in an auction under the supervision of the National Company Law Tribunal is real evidence of value and displaces the arithmetic unless the department can meet it with something cogent. Second, the computation itself can be corrected: assets whose realisation can never enure to the assessee's benefit are not to be included merely because they appear in the balance sheet. The warning is that the Bench took the auction price both ways, raising the consideration above what the assessee had declared. If it applies to you, the first step is this: Put the auction or resolution record on file in full - the resolution professional's valuation, the reserve price, the process document and the result - and show how close in time it is to your transfer.
The assessee had acquired 1,25,66,185 unquoted equity shares of Cethar Energy Limited in an e-auction conducted under the supervision of the National Company Law Tribunal at Rs 3.59 per share, a total of about Rs 4.51 crore. In the previous year relevant to assessment year 2020-21 she transferred 20,87,400 of those shares to one T.P. Pradeep Raj for Rs 50 lakh, that is at Rs 2.40 per share, and returned a capital loss of Rs 24,93,766. The Assessing Officer applied section 50CA and computed the fair market value of the shares under rule 11UA from the figures in the company's balance sheet, arriving at Rs 104.917 per share. Substituting that figure for the consideration, he assessed a deemed short-term capital gain of about Rs 21.15 crore. The assessee's case was that the company was in distress, that the insolvency resolution professional had left out roughly Rs 125 crore of unrealisable assets when fixing the reserve price for the auction, and that under the share purchase agreement the proceeds of certain assets had to be handed over to the liquidator, so she never had the benefit of them. The matter was decided on 2026-05-22 by the ITAT (Income Tax Appellate Tribunal, Chennai Bench - Shri George George K, Vice President and Shri S.R. Raghunatha, Accountant Member). On those facts the ITAT held as follows. The appeal was partly allowed and the order of the Commissioner (Appeals) was modified. The Tribunal held that the valuation determined by the insolvency resolution professional pursuant to auction proceedings conducted under judicial supervision carries substantial evidentiary value and cannot be brushed aside without cogent material. It held that the fair market value for the purposes of section 50CA deserved to be reasonably adopted at Rs 3.59 per share, being the price discovered in the auction supervised by the National Company Law Tribunal, and directed the Assessing Officer to recompute the capital gains on that figure in place of Rs 104.917 per share. On the rule 11UA computation itself, it held that assets whose realisation can never enure to the benefit of the assessee cannot be artificially loaded into the valuation mechanism merely because they continue to appear in the balance sheet, noting that clause 3.2.1 of the share purchase agreement required the proceeds of certain assets to be handed to the liquidator, so that the assessee never acquired beneficial ownership over them.
The Tribunal treated section 50CA as a provision that fixes on fair market value, with rule 11UA supplying a method of arriving at it, and asked what the best evidence of that value was on the facts. Its answer had two parts. The first was about the quality of the auction price. An e-auction held under the supervision of the National Company Law Tribunal, in which a resolution professional fixes the reserve price after excluding what cannot be realised, is a process with judicial oversight in which a price is actually discovered in the market. That, the Tribunal held, is evidence of substantial weight, and the department could not displace it by simply preferring an arithmetical figure; it had to bring cogent material. Since the auction was close in time to the transfer and concerned the very shares in question, the price it produced was the sounder measure. The second part went to the inputs of the rule itself. A book value computation assumes that the assets in the balance sheet belong to the company for the benefit of its shareholders. Where the resolution documents provide that the proceeds of particular assets go to the liquidator, the assessee never had the beneficial ownership, and to include them is to value something she did not get; the same applies to assets that cannot be realised at all. On both counts, Rs 104.917 per share did not represent fair market value. The Tribunal, however, did not accept the declared Rs 2.40 either, since the assessee's own contemporaneous acquisition price in the same auction was Rs 3.59. In the words reproduced by the source cited on this page: "The valuation determined by the Insolvency Resolution Professional pursuant to auction proceedings conducted under judicial supervision carries substantial evidentiary value and cannot be brushed aside without cogent material."
It was decided by the ITAT on 2026-05-22 and is reported as [2026] 187 taxmann.com 12 (Chennai - Trib.); IT Appeal No. 3332 (CHNY) of 2025. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 50CA, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. The appeal was partly allowed and the order of the Commissioner (Appeals) was modified. The Tribunal held that the valuation determined by the insolvency resolution professional pursuant to auction proceedings conducted under judicial supervision carries substantial evidentiary value and cannot be brushed aside without cogent material. It held that the fair market value for the purposes of section 50CA deserved to be reasonably adopted at Rs 3.59 per share, being the price discovered in the auction supervised by the National Company Law Tribunal, and directed the Assessing Officer to recompute the capital gains on that figure in place of Rs 104.917 per share. On the rule 11UA computation itself, it held that assets whose realisation can never enure to the benefit of the assessee cannot be artificially loaded into the valuation mechanism merely because they continue to appear in the balance sheet, noting that clause 3.2.1 of the share purchase agreement required the proceeds of certain assets to be handed to the liquidator, so that the assessee never acquired beneficial ownership over them. It arises in Capital Gains matters, on section 50CA of the Income Tax Act 1961, and was decided by Income Tax Appellate Tribunal, Chennai Bench - Shri George George K, Vice President and Shri S.R. Raghunatha, Accountant Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Go through the balance sheet item by item and identify assets whose proceeds you were never entitled to keep, pointing to the clause of the share purchase or resolution document that says so. Be ready for the fair market value to be fixed above your declared consideration; work out the tax on the auction price before you argue for it. Do not attack rule 11UA in the abstract - the Bench corrected the inputs to the computation and preferred better evidence of value, it did not hold the rule inapplicable.
Still good law. A decision of the Tribunal, so persuasive rather than binding. It is very recent - May 2026 - and no appeal against it, and no later decision considering it, was traced in searches run on 1 September 2026; that silence proves nothing either way at this stage. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order was read on Indian Kanoon; the Tribunal's own copy on itat.gov.in was not reached. The order applies rule 11UA as it stood for assessment year 2020-21; the record does not state which sub-rule the Assessing Officer used, and the reference in some reports to rule 11UAA was not confirmed from the text read. How much of the roughly Rs 125 crore of assets the Tribunal treated as excluded from the computation, as against simply preferring the auction price, is not separately quantified in the order. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was partly allowed and the order of the Commissioner (Appeals) was modified. The Tribunal held that the valuation determined by the insolvency resolution professional pursuant to auction proceedings conducted under judicial supervision carries substantial evidentiary value and cannot be brushed aside without cogent material. It held that the fair market value for the purposes of section 50CA deserved to be reasonably adopted at Rs 3.59 per share, being the price discovered in the auction supervised by the National Company Law Tribunal, and directed the Assessing Officer to recompute the capital gains on that figure in place of Rs 104.917 per share. On the rule 11UA computation itself, it held that assets whose realisation can never enure to the benefit of the assessee cannot be artificially loaded into the valuation mechanism merely because they continue to appear in the balance sheet, noting that clause 3.2.1 of the share purchase agreement required the proceeds of certain assets to be handed to the liquidator, so that the assessee never acquired beneficial ownership over them.
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I sold the same company's unquoted shares twice in one year at very different prices. Can the AO apply s.50CA using the later valuation?
I bought unquoted shares from family members at Rs 540 when the officer's rule 11UA working says Rs 661. Can a discount for lack of marketability and the company's real position be brought into the valuation?
I bought shares of a distressed company in an NCLT auction at Rs 3.59 and sold some months later at Rs 2.40. The officer used the balance sheet to value them at Rs 104 under rule 11UA. Can he?