COMMISSIONER OF INCOME TAX Vs. SHAH BHAVNANI CHANABHAI

JUDGEMENT

(1.) THIS is an application under Section 26(1) of the Gift-tax Act, 1958 (for short "the Act"), at the instance of the Revenue and the following two questions of law have been referred by the Tribunal for answer by this court :

(2.) DURING the previous year relevant to the assessment year 1985-86, the assessee gifted 1000 cumulative redeemable preference shares of Simplex Castings (P.) Ltd., Bhilai. In the return of gift, the assessee has returned the value of these shares on the basis of the yield method. While completing the assessment, the Assessing Officer applied the provisions of Rule 10 of the Gift-tax Rules, 1958 (for short "the Rules"), read with Section 6(3), valued these shares as prescribed therein and the value of these shares was estimated on the basis of the market price. On appeal by the assessee, the Commissioner of Gift-tax (Appeals) confirmed the findings of the Assessing Officer. On further appeal by the assessee, the Tribunal directed that for the purpose of value of these shares, whether equity or preference, the proper method has to be one based on the yield and accordingly allowed the assessee's appeal. Thereafter, the Department/ Revenue moved the Tribunal to refer the aforesaid two questions of law to this court and the Tribunal has accordingly referred the said questions of law to this court for its answer.

(3.) RULES have been made under the Act and they are known as the Gift-tax RULES, 1958. Rule 10 of the RULES which is relevant for our purposes reads as under :