The Income Tax Act, 1961 (the IT Act) mandates the taxation of premium received on issue of shares to resident Indians in excess of Fair Market Value (‘FMV’) by a company, as income u/s 56(vii) (b) of the Income Tax Act, 1961 in the hands of such company. Tax on the excess money received over and above the FMV was exempted in case if issuer is a start-up company. However, the tax authority continued raise tax demand quoting reason as the abnormal valuation projections etc. The Central Board of Direct Tax has instructed the tax authority that if additions have been made after modifying/rejecting the valuation reports submitted by start-up companies, no coercive measures to recover the tax demand be taken. Further, for all such cases which are pending before the Appellate Authority, necessary administrative steps should be taken for expeditious disposal of appeals, preferably by March 31, 2018.