1997 (7) TMI 70 - HC - Income Tax

Summary

Issues:
- Valuation of shares for gift tax purposes
- Allowance of deduction for tax liability
- Validity of gift by a minor
- Confirmation of valuation based on balance-sheet date
- Allowance of deduction or discount for restrictions on share transfer and non-marketability
- Valuation of gifted shares based on yield basis

Valuation of Shares for Gift Tax Purposes:
The case involved an assessee, a minor, who transferred his shares to his uncle at a rate of Rs. 3,000 per share. The Gift-tax Officer valued the shares using the break-up valuation method, resulting in a higher value per share of Rs. 5,898. The total value of the transferred shares was assessed at Rs. 7,37,250, leading to a deemed gift amount of Rs. 3,62,250. The Tribunal upheld this valuation, prompting the assessee to seek a reference to the High Court for several questions of law, including the adequacy of the share valuation. The High Court found that questions regarding the valuation did arise from the Tribunal's order and directed the Tribunal to refer these questions for consideration.

Allowance of Deduction for Tax Liability:
Another issue raised by the assessee was the deduction of tax liability, where the Tribunal allowed a deduction of Rs. 10,70,308 (equivalent to advance tax paid) instead of Rs. 16,19,000 (provision for tax liability in the balance-sheet). The High Court found that this question also arose from the Tribunal's order and directed its reference for consideration.

Validity of Gift by a Minor:
The Tribunal was questioned on the validity of the gift by a minor, but the High Court determined that this issue did not arise from the Tribunal's order as it was not raised as a ground before the Tribunal. Consequently, the High Court declined to consider this question.

Confirmation of Valuation Based on Balance-Sheet Date:
The Tribunal's decision to confirm the valuation of the gifted shares based on the balance-sheet as of March 31, 1984, rather than the one from March 31, 1983, was also challenged. The High Court found that this question did arise from the Tribunal's order and directed its reference for consideration.

Allowance of Deduction or Discount for Restrictions on Share Transfer and Non-Marketability:
The Tribunal's decision not to allow any deduction or discount for restrictions on share transfer and non-marketability of shares was also contested. The High Court determined that this question arose from the Tribunal's order and directed its reference for consideration.

Valuation of Gifted Shares Based on Yield Basis:
Lastly, the issue of whether the gifted shares should have been valued based on the yield basis instead of rule 1D was raised. The High Court found that this question also arose from the Tribunal's order and directed its reference for consideration.