| आयकर अपीलीय अिधकरण (cid:12)ायपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, HON’BLE VICE PRESIDENT &

SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER I.T.A. No. 2457/Mum/2024 Assessment Year: 2016-17 Income Tax Officer, Ward- S D N COMPANY 26(2)(1), Mumbai Vs R. No. 234, Kautilya Bhavan BKC, Bandra (E) Mumbai - 400051 [PAN: AAAFS7385N]

अपीलाथ(cid:22)/ (Appellant) (cid:23)(cid:24) यथ(cid:22)/ (Respondent)

Assessee by : Shri Firoze Andhiyarujina, Sr. Advocate & Maneck F. Andjiyarujina - Advocate Revenue by : Shri Dr. Kishor Dhule, CIT D/R सुनवाई की तारीख/Date of Hearing : 12/03/2025 घोषणा की तारीख /Date of Pronouncement: 20/03/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM:

This appeal by the revenue is preferred against the order dated 08/03/2024 by NFAC, Delhi, [hereinafter ‘the ld. CIT(A)’]

pertaining to AY 2016-17.

2. The grievance of the assessee reads as under:-

“1. "On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 126,98,69,717/- made u/s Section 56 (2)(vija) of the Act"

2. "On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of 126,98,69,717/- made by the AO, without appreciating the fact that the entire scheme of transactions embarked by the partners and the assessee firm is merely a colourable device to evade tax by misusing the provisions of the Act"

3. The appellant craves leave to amend or alter or add a new ground which may be necessary.”

3. Representatives were heard at length, case records carefully perused and the relevant documentary evidence brought on record duly considered in the light of Rule 18(6) of the ITAT Rules, 1963.

4. The entire quarrel revolves around the following profit sharing ratio of the assessee firm:-

Sr.no. Name of the Partners 01.04.2015 to 19.01.2016 to 18.03.2016 to

18.01.2016 18.03.2016 31.03.2016

1 FerozeDhunjishawNeterwala 33.34 25 3.34 2 ShemazFerozeVakil 33.33 25 3.33 3 PervinRussy Mehta 33.33 25 3.33 4 Universal Ferro and Allied 25 90 Chemicals P Ltd TOTAL __1_0_0_ _ 100 100

5. The bone of contention is the shares of M/s. Unitel Finance and Investments P. Ltd. (UFIPL). The three partners, namely, Feroze Dhunjishaw Neterwala, Shemaz Feroze Vakil and Pervin Russy Mehta have introduced shares of UFIPL in the assessee firm as capital contribution. The same can be understood from the following chart:-

No. of shares of M/s.

Amount(Rs.)

Sr.no. Name of the Partners Unitel Finance and (@92.88/share)

Investments P Ltd

1 FerozeDhunjishawNeterwala 91,666 85,13,938 2 ShemazFerozeVakil 91,667 85,14,031 3 PervinRussy Mehta 86,666 80,49,538 TOTAL 2,69,999 2,50,77,507

6. As can be seen from the above chart, the shares of UFIPL have been introduced as capital contribution @ 92.88/- per share totaling to Rs.2,50,77,507/-. The fair value of Rs.92.88/- per share was computed on 17/12/2015 as per the valuation report prepared by the Chartered Accountant as per Rule 11UA of the Income-tax Rules, 1962. Thereafter, on 18/01/2016, all the assets of the assessee firm including shares of UFIPL were valued based on valuation report of M/s. V B Desai Financial Services Limited (VBDFSL), a SEBI registered merchant banker.

7. A perusal of the report of VBDFSL, shows that the AO found that the value per share of UFIPL was computed by a merchant banker on intrinsic value of Rs.4786.53/- per share. The AO accordingly took the differential price of Rs.4693.65 (4786.53 – 92.88) per share aggregating to Rs.126,72,80,806/- as the fair value of shares of UFIPL and invoking the provisions of Section 56(2)(viia) of the Act, the AO made the addition of Rs.126,72,80,806/-.

7.1. At this stage, it would be pertinent to refer to the provisions of Section 56(2)(viia) of the Act:-

“Income from other sources.

15 56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources",