COMMISSIONER OF INCOME TAX Vs. S BALASUBRAMANIAM

JUDGEMENT

(1.) THESE are references under section 256(1) of the Income-tax Act, 1961, in which at the instance of the Revenue, the following two questions have been referred to this court :

(2.) M/s. Gemini Pictures Circuit Private Limited had an authorised capital of Rs. 25,00,000 divided into 25,000 shares of Rs. 100 each. Originally, 16,535 shares of the face value of Rs. 100 each had been issued and were fully paid and subscribed. On December 30, 1953, additional shares amounting to 4,311 of the face value of Rs. 100 each were issued to five share-holders and in respect of each of these shares, on]y a sum of Rs. 10 was called for and paid. Thus, as on December 30, 1953, the subscribed capital of the company was Rs. 16,96,610 made up of 16,535 fully paidup shares of Rs. 100 each and 4,311 shares of Rs. 100 each, but Rs. 10 being paid-up. As on December 31, 1953, the reserve had accumulated to Rs. 16,00.000. Thus, the aggregate of the subscribed capital and the reserves as on December 30, 1953, was Rs 32,96,610. On December 30, 1954, the board of directors of the company by a resolution called for the balance amount of Rs. 90 per share in respct of the 4,311 subsequently issued shares. It is not in dispute that this amount was later on paid by the shareholders.

(3.) THE Income-tax Officer did not accept the valuation shown by the assessee. In view of the fact that 1,047 shares sold by Srinivasa Iyer and 4,720 shares transferred by Balasubramanian had not been fully paid up as on January 1, 1954, he took the total paid-up value of the shares so transferred as Rs. 30,050 and Rs. 2,09,370 in the case of Srinivasa Iyer and Rs. 47,200 in the case of Balasubramanian. THE Income-tax Officer arrived at a formula by which he worked out the market value of the shares as on January 1, 1954, by dividing the aggregate of the capital and the reserves by the total value of these shares and multiplying the product by the total paid-up value of shares. It is enough to give one illustration of computation, which is as follows : <FRM>JUDGEMENT_288_ITR159_1986Html1.htm</FRM>