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Issues involved: Interpretation of the break-up value of unlisted shares for income tax assessment.
Summary: The High Court of Delhi addressed the issue of determining the market price of unlisted shares for income tax assessment in a case involving the purchase of shares of a company not listed on the stock exchange. The Assessing Officer considered a circular by the Central Board of Direct Taxes and the Supreme Court decision in Bharat Hari Singhania v. CWT [1994] 207 ITR 1 to calculate the perquisite obtained by the assessee. However, the Commissioner of Income-tax (Appeals) relied on rule 5 of Schedule II to the Gift-tax Act to determine the break-up value of the shares, concluding that no addition should be made to the assessee's income. The Tribunal upheld this view, emphasizing that the break-up value, excluding miscellaneous expenditure, was the appropriate assessment. The High Court agreed with the lower authorities, stating that there is no method under the Income-tax Act, 1961 for calculating the value of unquoted equity shares. It was noted that the Assessing Officer's reliance on the Supreme Court decision was more relevant for wealth-tax assessment, and the circular's application was inappropriate given the unlisted nature of the shares. Ultimately, the Court found no substantial question of law and dismissed the appeal. In conclusion, the High Court affirmed the decision of the lower authorities regarding the calculation of the break-up value of unlisted shares for income tax assessment, emphasizing the absence of a specific method under the Income-tax Act and the inapplicability of certain references relied upon by the Assessing Officer.
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