COMMISSIONER OF GIFT TAX Vs. K V SRINIVASAN

JUDGEMENT

(1.) THE batch of tax case references arises under the Gift-tax Act, 1958. THE years of assessment with which we are concerned are 1972-73 and 1973-74 and there are three assessees who are the respondents in all the tax cases. All the assessees were shareholders in a private limited company called, Haritha Private Limited along with other family members. THE members of the family sold the shares among themselves in the company called Union and Co. Pvt. Ltd. THE assessees computed the capital gains arising out of the sale on the basis of consideration received against the assets on the basis of the figures furnished by them. Subsequently, the assessment was reopened on the ground that the value shown by the assessee did not represent the fair market value. THE Gift-tax Officer reopened the assessment and brought to tax the difference between the value shown by the assessee and the value arrived at on the basis of a method which, according to him, was the most suitable method and levied the tax on the difference in the value of the shares under the provisions of the Gift-tax Act. On appeal by the assessees before the Appellate Assistant Commissioner, the Appellate Assistant Commissioner cancelled the reassessment and on further appeal by the Department, the Tribunal held that the Gift-tax Officer had no jurisdiction to levy tax under Section 4(1)(a) of the Gift-tax Act, as the assessees have chosen to adopt one method of valuation of shares and merely because there was a different method which would have resulted in a higher value, which was not adopted by the assessee that is not a ground for the Gift-tax Officer to adopt that method and Section 4(1)(a) of the Act was not attracted. Challenging the order of the Appellate Tribunal, the Revenue has come to this court by way of reference on the following questions of law :

(2.) WE have set out the facts earlier. The facts clearly reveal that at the time of original assessment, the assessees have shown the value of the shares transferred by adopting a method prescribed by the Central Board of Direct Taxes. It is not disputed that the assessees returned the value of the shares transferred by them in a recognised method of valuation and it is not permissible for the Gift-tax Officer to adopt a different method of valuation which might yield a higher value. Therefore, it is not open to the Gift-tax Officer to hold that there was a deemed gift within the meaning of Section 4(1)(a) of the Act by choosing to adopt another method of valuation. In our opinion, the Tribunal has come to the correct conclusion in holding that there was no deemed gift. As the Tribunal found that it was a bona fide transaction and the value as returned by the assessee was arrived at on the basis of a recognised method of valuation, we do not find any infirmity in the order of the Appellate Tribunal.