COMMISSIONER OF GIFT TAX BANGALORE Vs. K SARADHI

JUDGEMENT

(1.) This Gift Tax Case is preferred by the Revenue against the order of the Income Tax Appellate Tribunal, Hyderabad-B Bench, dated 24-4-1991 rejecting the plea of the Revenue to refer the points of law for decision by this Court.

(2.) The dispute is with regard to computation of the value of the unquoted equity shares of M/s. Sri Ramdas Motor Transport Ltd. The assessees are the shareholders of S.R.M.T. Ltd., Kakinada. Certain shares of the assessees, the relative face value of which is Rs.50.00 each, were sold by the assessees. The Assessing Officer viewed that the difference in the value of the shares under Rule 1-D of the Wealth Tax Rules and the selling price thereof amounted to deemed gift and consequently, while charging it to Gift-tax, the Assessing Officer refused to adopt the assessees method of valuation of shares under the Yield method. On appeal, the appellate Officer viewed that the correct method of arriving at the value of the shares being unquoted would be the break-up method and consequently directed the Assessing Officer to value the shares accordingly by reference to its existing assets for the purpose of taxable gift. On assessee's appeal, the Tribunal reversed the judgment holding that unquoted equity shares of the company have to be valued under yield method only even for Wealth-tax purposes relying upon the judgment of the Supreme Court in CGT v. Executors & Trustees of Ambalal Sarabhai, (1988) 36 Taxman 162-A (SC), which was followed by this Court in Dr. D. Renuka v. C.W.T., (1989) 175 ITR 615(AP).

(3.) Mr. S.R Ashok, the learned Counsel appearing for the Commissioner of Gift Tax strenuously contends that the decisions rendered by the Supreme Court and this Court are not at all applicable to the facts of this case and that this case is distinguishable and on the other hand, this case is squarely covered by the judgment of Madras High Court in C.W.T. v. S.Ram, (1984) 147 ITR 278 (Mad.). He submits that the unquoted shares have to be valued by applying Rule 1-D of Wealth Tax Rules. Contention is that since the market value of the shares sold out was much more than the consideration for which the shares were sold, the Gift-tax is payable for the difference between the market value and the actual consideration, as it is a deemed gift under Section 4 (1)(a) of the Gift Tax Act, 1958 and that valuation by yield method is not the correct procedure and the valuation should be by break-up method and that the lower authorities had correctly valued the shares with reference to its existing assets, for the purpose of determining the taxable gift.