Reversionary powers under section 263 alleging wrong value adopted for FMV as per Section 56(2)(viib)

Facts:

Assessee computed FMV for issuing shares taking into account goodwill basing 5 year purchase of past 3 year average profits + 2 prospective years. This was explained to in the assessment where the AO chose not to disturb the issue/allotment price. PCIT invoked Section 263 and questioned the same alleging that the inclusion of intangible goodwill was erroneous and prejudicial to the interests of the revenue and the difference in the calculated FMV ought to have been added under section 56(2)(viib). On higher appeal -

Held in favour of the assessee that the PCIT was taking one plausible view thus the revision was uncalled for.

Ed. Note: The way the goodwill has been computed and whether in a company this needs to be taken separately or is part and parcel of the embedded value are all topics worthy of discussion. Where DCF method is adopted the goodwill is built into the pricing one way or other. On the other hand while the adjusted book value as per rule 11UA is adopted it might need an adjustment as the same is not reflected in the formula given by the rules or is it that the rules do not accept goodwill or any other intangible asset in its scope?

Case: Karamveer Electronics Ltd. v. Pr. CIT 2024 TaxPub(DT) 1719 (Del-Trib)