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Issues: Valuation of shares based on break-up method vs. yield method; Conflict of views by different High Courts; Application of rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963.
Valuation of Shares - Break-up Method vs. Yield Method: The case involved the valuation of shares of a company using the break-up method as per rule 1D of the Wealth-tax Rules, 1957. The assessee had revised the valuation of shares by considering the advance tax paid as a deduction from the asset side and including the provision for taxation as a liability. The controversy arose when the Income Tax Officer (ITO) disagreed with this method and valued the shares at a lower amount. The assessee contended that the shares should be valued based on the principle established by the Gujarat High Court in a specific case. However, the revenue argued for a different approach based on conflicting views from other High Courts. The Tribunal held that the valuation made by the WTO using rule 1D was appropriate, and the AAC's decision in favor of the assessee was reversed. Conflict of Views by Different High Courts: The revenue cited conflicting views by various High Courts, such as the Punjab and Haryana High Court and the Karnataka High Court, to support their argument against the valuation method proposed by the assessee based on the Gujarat High Court's decision. The assessee, on the other hand, argued that when there are conflicting views by different High Courts, the one favorable to the assessee should be preferred. The Tribunal emphasized that the majority view should be followed, especially considering subsequent decisions by different High Courts. Ultimately, the Tribunal decided to align with the majority view and upheld the valuation method based on rule 1D. Application of Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963: The assessee raised a new contention during the appeal, suggesting that the shares should have been valued using the yield method instead of the break-up method. However, the Tribunal noted that this point was not raised before the lower authorities and could not be considered under rule 27 since it was not a ground decided against the assessee by the lower authority. The Tribunal highlighted that the assessee consistently advocated for the valuation under rule 1D and did not propose the yield method earlier. Therefore, the Tribunal rejected the new contention raised by the assessee during the appeal, emphasizing the lack of supporting material for the yield method valuation. In conclusion, the Tribunal reversed the AAC's decision and upheld the valuation of shares based on the break-up method under rule 1D, emphasizing the lack of sufficient data and material to support the yield method valuation proposed by the assessee. The judgment highlighted the importance of following the majority view in cases of conflicting decisions by different High Courts and reiterated the significance of consistency in valuation methods throughout the assessment process.
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