Rule 11UA(2)(b)

Rule 11UA(2)(b) — the law in short

What the courts have decided on section Rule 11UA(2)(b), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• PCIT v Cinestaan Entertainment P Ltd High CourtHelps taxpayer
  The department says my DCF projections never came true. Is that enough to tax my share premium?
  No. Valuation is a question of fact and is not an exact science, so a forecast cannot be rejected by comparing it with actual revenues in hindsight. The Revenue must show the methodology adopted was demonstrably wrong.
• Vodafone M-Pesa Ltd v PCIT High CourtHelps taxpayer
  Can the AO switch my valuation from DCF to NAV because the NAV figure suits him better?
  No. The officer may scrutinise the valuation report and may even call for a fresh valuation from an independent valuer, but he cannot change the method the assessee opted for under Rule 11UA — any fresh valuation must stay on the DCF basis.
• SPL Infrastructure Pvt. Ltd. v ITO — the choice of method is the assessee's, but a DCF report first produced during assessment does not displace the officer's NAV computation, and Rule 11UA(3) does not help ITATHelps departmentNo later treatment found
  The Assessing Officer rejected our DCF valuation and computed fair market value on net asset value under Rule 11UA. Doesn't the Delhi High Court say the choice of method belongs to the company?
  It does, but the choice is not the end of the enquiry. The Chennai Bench read the Delhi High Court in Agra Portfolio as holding both that the option and choice vest solely in the assessee on a conjoint reading of section 56(2)(viib) with Rule 11UA(2), and that it remains open to the Assessing Officer to doubt or reject a DCF valuation submitted for his consideration. On the facts — a premium fixed on a board resolution and a chartered accountant's opinion, with a DCF report unsigned and undated obtained only during the assessment three years after the issue, and no supporting material — the Bench held the officer rightly adopted the Rule 11UA(2) method and dismissed the appeal.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.