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Issues: Valuation of unquoted shares of a private limited company, treatment of advance tax and tax deducted at source in valuation, computation of provision for taxation, valuation of goodwill in a firm, consideration of stray commission income in goodwill valuation.
In this case, the appeal pertains to the estate of a deceased individual, with the main issue revolving around the valuation of unquoted shares of a private limited company. The accountable person had valued the shares at Rs. 1,20,634, while the Asstt. Controller adopted a higher value of Rs. 1,93,524 based on the method under WT Rules (1-D) since there were no specific rules under the ED Act for valuing such shares. The appellant raised a grievance regarding the treatment of advance tax and tax deducted at source in the valuation process. The appellant contended that the Asstt. Controller had erred in excluding only the advance tax amount of Rs. 67,031 and not considering the tax deducted at source, leading to a total deduction of Rs. 3,79,212. The Tribunal agreed with the appellant's argument, emphasizing that the total deduction should include both advance tax and tax deducted at source, as evidenced by the balance sheet of the company. Therefore, the first point made by the appellant was upheld. Regarding the computation of the provision for taxation, the Asstt. Controller had incorrectly deducted the advance tax amount from the tax payable, resulting in an error. The Tribunal noted that the tax payable of Rs. 2,17,150 should be considered as a liability for calculating the share value, contrary to the Asstt. Controller's calculation of Rs. 1,50,119. The appellant failed to provide a clear explanation for the provision for taxation amount of Rs. 4,47,926, leading to the Tribunal accepting the tax payable amount of Rs. 2,17,150 as the correct liability to be considered in the valuation process. Another issue raised was the valuation of goodwill in a firm where the deceased was a partner. The Asstt. Controller had determined the goodwill value using the super-profits method, considering a commission income of Rs. 28,000 received in a single year. The appellant argued that this stray commission income should not be factored into the goodwill valuation, as it was not a regular part of the firm's income. The Tribunal agreed with the appellant, stating that the goodwill should be calculated based on normal profits earned consistently and excluding one-time incomes like the commission. Consequently, the Tribunal held that there was no goodwill in the firm and excluded the value of Rs. 1,863 from the estate's assets. In conclusion, the appeal was allowed in part, with the Tribunal addressing the issues related to the valuation of unquoted shares, treatment of advance tax and tax deducted at source, computation of provision for taxation, and valuation of goodwill in a thorough and detailed manner, ultimately providing a favorable decision for the appellant.
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