The ITAT Delhi ruled that a share premium difference within the 10% safe harbour is not subject to addition under Section 56(2)(viib), confirming the issue price as the fair market value.
ITAT Confirms Share Premium Safe Harbour Rule
The ITAT Delhi has determined that where the share premium difference falls within the 10% safe harbour as per Rule 11UA, the issue price of shares shall be deemed to be the fair market value. This ruling resulted in the deletion of an addition under Section 56(2)(viib).
This decision highlights the critical interpretation of safe harbours established by the tax regulations and provides clarity on the application of premium valuations. The Tribunal's ruling indicates a broader acceptance of the protections provided under statutory provisions aimed at promoting compliance with share pricing norms.
Tax advisors should note the significance of this ruling when advising clients on share transactions, as it establishes a clear legal framework against which share premiums can be assessed, thereby assisting in strategic financial planning for equity issuance.
Citations
- ITAT Delhi (2026) 5 ITL 120
