CONTROLLER OF ESTATE DUTY Vs. J KRISHNA MURTHY

JUDGEMENT

(1.) Under S.64(1) of the Estate Duty Act, 1953 (hereinafter called the Act), the Appellate Tribunal has stated a case and referred the following queet on for the opinion of this Court:

(2.) One Mr. William Whitley died on September 11, 1967. At the time of his death he owned certain shares in Senapathy Whitley (P) Ltd. The subscribed equity share capital of the said company was divided into 15,000 shares of Rs.100 each, of which the deceased held 1,000 shares. The accounting year of the company ends on 31st December and its Balance Sheet as at 31st December 1966 had been published before the date of death. The shares held by the deceased as on 31-3-1967-the Valuation date'-for the assessment year 1967-68 had been valued by the Wealth-Tax Officer at Rs. 1,69,020 in accordance with S.7 of the Wealth Tax Act, 1957 read with Rule 1D of the Wealth Tax Rules, 1957. Subsequent to 1-4-1967 but before the date of death, the company had issued 6,000 Bonus shares raising its subscribed Equity Share Capital from Rs. 15,00,000 to Rs.21,00,000. 400 Bonus Shares were issued to the deceased. Thus, on the date of death, the deceased held 1,400 ordinary shares of the face value of Rs.100. The accountable person declared the value of the said shares at Rs.1,52,600. The Assistant Controller of Estate Duty arrived at the value of Rs.2,23,174 valuing each share at Rs. 159-41 which was arrived at in the following manner: Value of net assets of the company on tha basis of its Balance -Sheet as at 31-12-1966 Rs.26,82,792-00.

(3.) Estimated value of goodwill Rs. 12,33,800-00. Total Rs.39,16,592-00. Break-up value on the above basis was worked at Rs. 186-50 a share. As the death took place nearly eight months after 31-12-1966, taking into account the expected dividend for the year 1967, he raised the value to Rs. 196-50 a share. Taking the normal yield from such companies at 8 per cent he valued the shares on yield basis at Rs.250 a share, as it stood on 31-12-1966 before the declaration of Bonus Shares. He computed the value of Rs. 178-57 a share after the declaration of Bonus Shares. Averaging the two values, one on the basis of break-up value and the other on yield basis, the Assistant Controller valued the shares at Rs. 159-41 a share.