COMMISSIONER OF GIFT TAX Vs. S NAGANATHAN

JUDGEMENT

(1.) IN pursuance of the directions of this Court in TCP Nos. 446 & 447 of 1983, dt. 9th January, 1984, the Tribunal has referred the following question of law for our consideration :

(2.) THE matter arises under the GT Act and relates to two assessment years, namely 1972-73 and 1973-74. THE assessee during the course of previous year relevant to the asst. yr. 1972-73 sold fifty equity shares in M/s Haritha Pvt. Ltd. for a sum of Rs. 61,808 apart from four shares gifted by him. THE GTO, however, determined the value of the shares at Rs. 4,577.94 per share based on the break up value worked out by substituting the fair market value of Rs. 26,92,400 for land and buildings estimated by the District Valuation Officer of its Department in the reference made under s. 15(6) of the GT Act, 1958 (hereinafter to be referred to as 'the Act') for the balance sheet figure of Rs. 6,07,348 for the land and buildings as on 30th September, 1971. THE GTO adopted the market value of the land and buildings and determined the value of the shares transferred by way of gift as well as the sale which came to Rs. 2,47,209 as against nil consideration in money's worth in respect of four shares gifted and consideration of Rs. 61,808 in respect of fifty shares sold. THE GTO, accordingly, computed the chargeable gift at Rs. 1,85,401 comprising of direct gifts of Rs. 18,312 and deemed gift under s. 4(1)(a) of the Act of Rs. 1,67,089. After deducting a sum of Rs. 4,880 which was admitted as gift, the GTO added the difference of Rs. 1,80,521 and completed the assessment for the asst. yr. 1972-73. For the asst. yr. 1973-74, the assessee sold seventy three shares held in M/s Haritha Pvt. Ltd. and the GTO computed the deemed gift following the same process adopted for the earlier assessment year and determined the deemed gift under s. 4(1)(a) of the Act at Rs. 2,40,165 and completed the assessment.

(3.) WE have carefully considered the rival submissions of the learned counsel for the respective parties. Mr. C. V. Rajan is justified by his submission that the assets for the purpose of gift-tax should be valued at fair market value under the provisions of s. 6 of the Act and in the absence of any statutory rule, nothing forbids the GTO to value the shares to determine the correct fair market value of the shares on the date of transfer. However, it is significant to notice that the assessee had valued the shares on the basis of a circular issued by the CBDT in Circular No. 2(WT), dt. 31st October, 1967. The said circular, in so far as it is relevant for the purpose of this case is concerned, reads as under :