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Interpretation of section 6 of the Gift-tax Act, 1958 regarding valuation of shares for gift-tax assessment. Analysis: The judgment of the High Court of Kerala involved a question referred by the Income-tax Appellate Tribunal regarding the proper valuation of shares for gift-tax assessment. The dispute revolved around the value of 1,000 shares in a company gifted by the assessee on March 25, 1971, during the assessment year 1971-72. The assessee valued each share at Rs. 200, while the GTO disagreed and valued them at Rs. 398.61 based on the company's balance-sheet as of March 31, 1971. The assessee contended that the value should be Rs. 330 per share, as shown in the balance-sheet of March 31, 1970. The AAC supported this view, emphasizing that the profit for the year 1970-71 could not be determined before March 31, 1971. The Tribunal, considering the open market value on the date of the gift, adopted the value from the balance-sheet of March 31, 1970, as it was the information available to potential buyers. The court analyzed Section 6 of the Gift-tax Act, 1958, which requires estimating the value of property transferred by gift as the price it would fetch in the open market on the gift date. It highlighted that shareholders convey relevant information to potential buyers, and the valuation of shares should be based on available information at the time of the gift. The court emphasized that shareholders could not predict the company's profit before the year-end, and thus, the balance-sheet of the previous year was crucial for valuation. The court cited the High Court of Gujarat's decision and the House of Lords' decision to support its interpretation. Ultimately, the court upheld the Tribunal's decision, ruling in favor of the assessee and against the Revenue. The judgment concluded by directing the transmission of the judgment copy to the Income-tax Appellate Tribunal, Cochin Bench, for further action.
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