DEPUTY COMMISSIONER OF GIFT TAX Vs. BPL LIMITED

JUDGEMENT

(1.) The issue raised in these appeals relates to the valuation of 29,46,500 shares of M/s. BPL Sanyo Technologies Limited and 69,49,900 shares of M/s. BPL Sanyo Utilities and Appliances Limited, which were gifted by the respondent-assessee, M/s. BPL Limited, to M/s. Celestial Finance Limited on 2/3/1993. The shares of M/s. BPL Sanyo Technologies Limited and M/s. BPL Sanyo Utilities and Appliances Limited, both public limited companies, were listed and quoted on the stock exchanges. However, these gifted shares, being promoter quota shares, allotted to the assessee on 17/11/1990 and 10/7/1991, were under a lock-in period up to 16/11/1993 and 25/5/1994[1], respectively.

(2.) As per the provisions of the Gift Tax Act, 1958[2], as it was applicable on the date on which the gift was made, gift tax at the applicable rate is chargeable on the value of the taxable gift. Sub-sec. (1)(a) to Sec. 4[3] of the G.T. Act states that where a property is transferred otherwise than for adequate consideration, the amount by which the market value of the property, at the date of the transfer, exceeds the value of the consideration, shall be deemed to be a gift made by the transferor. Sub-sec. (1) to Sec. 6[4] of the G.T. Act states that the value of any property, other than cash, which is transferred by way of gift, shall be its value on the date on which the gift was made and shall be determined in the manner as laid down in Schedule II of the G.T. Act. Sub-sec. (1) to Sec. 6 is subject to the provisions of sub-sec. (2) to Sec. 6 of the G.T. Act, which sub-sec. need not be elucidated as it is not applicable in the context of the present case. It is an accepted position that the machinery provision relating to the method of valuation in Schedule II of the G.T. Act is mandatory and cannot be deviated.[5]

(3.) Schedule II to the G.T. Act, which incorporates the rules for determining the value of a gifted property, states that the value of any property, other than cash, transferred by way of gift, subject to the modifications as stated, shall be determined in accordance with the provisions of Schedule III of the Wealth Tax Act, 1957[6]. Therefore, we are required to refer to and apply the provisions of Part C of Schedule III of the W.T. Act, which lays down the method of valuation of shares and debentures of a company. For the purpose of the present decision, we are required to interpret Rules 9 and 11 of Part C of Schedule III of the W.T. Act, which relate to the valuation of quoted shares and debentures of companies and valuation of unquoted equity shares in companies other than investment companies respectively and read thus: