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TMI Blog1981 (4) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... ties towards payment of gratuity is a contingent liability and therefore does not go to reduce the wealth of the Company and consequently need not be taken into consideration while arriving at the value of the shares by the break-up value method. When the matter went up to the Tribunal, revenue relied upon the order of the IT Appl. Tribunal, Jaipur Bench in WTA No. 82 and 83/JP/1977-78, which had been decided in favour of the revenue. The counsel for the assessee, however, pointed out other orders by the Bombay Bench, which were favourable to the assessee and in particular, the order of the Bombay Bench being in WTA No. 814/Bom/1975-76 in case of Shri Sampatmal Lodha, who happens to be a relation of the present assessee. The Tribunal thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be decided in favour of the assessee. After the decision of the Bombay High Court in the case of Tata Iron Steel Co. Ltd. (1975) 101 ITR 292 (Bom), it is clear that gratuity payable by the assessee in accordance with the payment of Gratuity Act is an accrued liability and not a contingent liability. An outside purchaser of shares would naturally take into account all the liabilities of the Company before arriving at the market value of the shares. In case of Shri Sampat Lodha, it was held by the Tribunal that liability towards payment of gratuity is not a contingent liability. It, therefore, cannot be excluded under cl. 6 of Explanation II(ii) to Rule 1-D. The Tribunal had earlier set-aside the order directing the authorities below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in appeal. 5. The ld. counsel for the assessee argued that the assessee is entitled to a deduction of liability as per law. The real value of the shares would depend on the actual liability and not on what balance-sheet indicates. It was, therefore, contended that there was no error in the order of the AAC passed earlier directing that the liability towards payment of gratuity as per actuarial valuation should have been taken into consideration. The ld. Deptl. Rep. on the other hand, argued that R. 1-D is mandatory while evaluating value of shares the provisions should be followed strictly. 6. We have heard the rival contentions. The market value of the shares would depend upon what a willing buyer would pay for them. The willing buyer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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