Section 56(2)(viib) exclusion for a Venture capital undertaking

Facts:

Assessee a closely held Venture capital undertaking (VCU) had issued shares of Rs. 1 each at a premium of Rs. 1240 each to a Venture Capital investor (VCF) based on the Discounted Cash flow (DCF) valuation of its shares. Revenue's case was that the excess share premium based on AO's valuation as per rule 11UA deserved addition under Section 56(2)(viib). On appeal CIT(A) held that the exclusion in Section 56(2)(viib) to VCU/VCF would apply to the assessee. Aggrieved revenue went in higher appeal -

Held against the revenue that the exclusion for VCU for funding from a VCF would cover the assessee and the additions cannot be sustained under Section 56(2)(viib).

Ed. Note: Finance Bill, 2023 has expanded the scope of Section 56(2)(viib) by making it applicable even for non-residents. It needs to be seen how far can this amendment travel in the days to come.

Case: ACIT v. Drishti Soft Solutions (P) Ltd.  2023 TaxPub(DT) 947 (Del-Trib)