COMMISSIONER OF GIFT TAX Vs. SUNDARAM INDUSTRIES LIMITED

JUDGEMENT

(1.) AT the instance of the Department, the Tribunal referred the following two questions for the asst. yrs. 1973-74 and 1974-75 for our opinion, under s. 26(1) of the GT Act, 1956.

(2.) THE assessee is a company, which sold certain shares in its sister companies during the years under consideration, i.e., during the asst. yr. 1973-74, the shares of M/s India Motor Parts and Accessories Ltd. and M/s Sundaram Pvt. Ltd. were sold and during 1974-75, the shares of M/s Sundaram Fasteners were sold. THE GTO was of the opinion that the market value of the shares was higher and so he sought to bring the difference of Rs. 3,12,702 for the asst. yr. 1973-74 and Rs. 9,45,786 for the asst. yr. 1974-75 to tax. THE mode of computation adopted by the GTO as well as the mode of computation adopted by the assessee were the same; but the reason for the difference has been explained in detail in the order of the first appellate authority. THE GTO and the assessee had followed the method of break up value of the shares; but the GTO proceeded from the balance sheet nearer to the date of sale, which is subsequent to the date of sale; but the assessee relied on the balance sheet for the period prior to the date of sale, on the ground that it was the only balance sheet, available on date. THE second difference was due to dispute as to the extent of discount that has to be allowed in ascertaining the market value with reference to the break up value of the shares.

(3.) INSOFAR as the India Motor Parts and Accessories Ltd. is concerned, it was submitted that the balance sheet as on 31st March, 1972 has to be taken, as stated by the High Court in CGT vs. Prema Srinivasan (supra). The GTO has taken into account the profits earned during the 10 months upto 31st January, 1973 into consideration and the average profits for five years ending 31st March, 1972 at Rs. 2,96,000. On this basis, the break up value per share was worked out at Rs. 139. Since the Tribunal has allowed 30% discount in the case of T. V. Sundaram Iyengar & Sons Ltd., and there are similar restrictive clauses in this case also, a similar discount at 30% was granted, which would result in the value coming down to Rs. 97.03 per share. As the sale price was Rs. 109.50, there is no undervaluation in this case, according to the Tribunal.