COMMISSIONER OF GIFT TAX Vs. SATYA NAND MUNJAL

JUDGEMENT

(1.) THE assessee made a gift of 4,000 equity shares of Hero Cycles Private Limited to Satyanand Munjal Trust No. 1. He valued these shares at Rs. 170 per share. He also made a revocable gift of 6,000 equity shares of Hero Cycles Private Limited to Yogesh Chander and Brothers by a revocable gift deed. According to the terms of the deed, the assessee had the right to revoke the gift after completion of 74 months from the date of transfer but before the expiry of 82 months. A return as contemplated under the Gift-tax Act, 1958, for the assessment year 1982-83 was filed by the assessee on July 27, 1982. He declared a total gift of Rs. 4,64,280. Gift to Satyanand Family Trust. No. 1 was valued at Rs. 3,81,000. THE revocable gift of 6,000 equity shares was valued at Rs. 83,280.

(2.) THE Gift-tax Officer examined the matter. He made a reference under Section 15(6) of the Act read with Section 16A of the Wealth-tax Act, 1957, to the Valuation Officer. On receipt of the reference, the Valuation Officer gave a notice to the assessee. After receipt of requisite information, the Valuation Officer took the view that "the value of shares should be based on the balance-sheet as on June 30, 1981, and not on the balance-sheet as on June 30, 1982, because when the shares were gifted, the immediate preceding balance-sheet was that of June 30, 1981". He also noticed the fact that 28 lakhs fresh shares had been issued by the company on December 24, 1981. After examination of the balance-sheet, the Valuation Officer fixed the value of each share at Rs. 383.75.

(3.) THE assessee was aggrieved by the order passed by the Gift-tax Officer. He filed an appeal. THE Commissioner of Gift-tax (Appeals) held that the value of the shares has to be determined under Rule 10(2) of the Gift-tax Rules, 1958. THE assessing authority has "got the valuation of shares determined by the official valuer . . .". THE valuer had assessed the value with reference to the balance-sheet. He had taken into account the total assets and after allowing for the liability, determined the value of each share. After going through the report of the Official Valuer, the appellate authority held that he did not "find any infirmity in that report . . .". THE assessee's contention that "the assets in the balance-sheet do not depict the true picture ..." was rejected. Thus, it was held that "the action of the Gift-tax Officer for determining the share value of the Hero Cycles Ltd. at Rs. 383.75 per share on February 9, 1982, on the basis of break up value method in view of Rule 10(2) is in order and the written submission of the appellant (assessee)... based on yield method ... is not applicable. . .".