COMMISSIONER OF GIFT TAX Vs. VENU SRINIVASAN

JUDGEMENT

(1.) THE question of law in this reference, which is under the Gift-tax Act, 1958 ("the Act"), is as follows :

(2.) THE question for consideration is about the valuation of unquoted shares of a private company. THE valuation in such cases is done by following the break-up value method. That is to say, the assets and liability of the company, whose shares have to be valued, would be taken into account first and the net worth of the company will be ascertained therefrom. THEreafter, the value of the individual shares will be determined. For arriving at the value of the company's assets and liabilities, the company's balance-sheet is usually referred to far relevant figures of valuation.

(3.) THE frame of the question of law expects us to say which value per share, in terms of rupees and paise, is the correct valuation. Within the framework of the tax reference procedure, however, it is possible for us to answer the question in this form. Having decided the matter of principle that the break-up value of the shares has to be worked out on the basis of the balance-sheet as at March 31, 1971, which is nearer the date of the gift, we must leave the actual figures to be worked out by the forum whose job it is to render factual findings.