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TMI Blog1973 (4) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... Taxes. Before the Board, it was contended that the 500 shares which were owned by the deceased individually were lying pledged with the banks at the time of his death for obtaining overdraft facilities and that the said shares were sold in 1959 at the rates ranging from Rs. 67 to Rs. 70 per share, and that, therefore, these shares should be valued at the price for which they were actually sold. As regards the shares held by the firm in which the deceased was a partner, it was contended that the shares should be valued only at Rs. 87 per share being the market quotation in the Madras Stock Exchange on the relevant date. The Board, however, reduced the value of the shares from Rs. 140 to Rs. 110 per share taking into account the fact that the shares had a special appeal for buyer who is engendered by the prospects of acquiring control over the mills and as such the stock exchange quotation may not reflect the true value of the shares. As regards the deceased's share in the managing agency rights, it was contended by the accountable persons before the Board that it is not " property ", that it had no market value, that it is only a contract of personal service and that, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal service and as such has no value cannot be accepted. The said question is, therefore, answered in the affirmative and against the accountable persons. Questions Nos. 1 to 3 relate to the value of the shares held by the deceased as well as by the managing agency firm, and questions Nos. 5 and 6 relate to the valuation of the managing agency rights of Messrs. G. Venkataswami Naidu Co., of which the deceased was a partner. It is the contention of the accountable persons that the 500 shares belonging to the deceased should be valued at the price they were sold by the bank to whom they had been pledged, that the balance of the shares should be valued at Rs. 87 which is the actual quotation in the Madras Stock Exchange on the relevant date, and that the valuation of the share at Rs. 110 by the Board is quite arbitrary and contrary to the provisions in section 36 of the Estate Duty Act. We can straightaway reject the contention that the 500 shares held by the deceased should be valued at the price which they actually fetched in the market when they were sold by the bank. It is seen that the bank to whom the 500 shares were pledged sold the same in the year 1959. That price ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res here and there as in this case. It may be pointed out that the principle of the 'special' purchasers has been accepted in Inland Revenue Commissioners v. Clay : Inland Revenue Commissioners v. Buchanan. In the present case, the large holding of shares of the Janardhana Mills by the deceased and the firm, in which the deceased was a partner, was of special interest to certain purchasers who were eager to buy these shares with a view to acquire control over the mills. In the presence of these circumstances, stray instances of sales at a particular price cannot be taken as a safe guide for arriving at the proper value of the shares. There are cases, of which the case under consideration is one, where the property has a unique appeal for the buyer. This appeal is engendered by the prospect of acquiring control over the affairs of the company. In arriving at the true market value, due weight has to be given to those specifically interested parties to whom the property in question has more than a normal commercial appeal. " It is thus clear that the Board has valued the shares on the basis that the large holding of the shares by the deceased and the firm in which he was a partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he value of the property has to be estimated at the price it would fetch if sold in the open market at the time of the deceased's death. As already stated, the stock exchange quotation for the company's shares on the date of death of the deceased was Rs. 87 per share as against the face value of Rs. 50. The Board has proceeded on the basis that if the shares held by the deceased and by the firm of which he was a partner, if sold in bulk, would get a higher price in the market in view of the fact that the person who owns such a bulk of shares will be in a position to control the affairs of the company and that, therefore, such a higher potential value has to be taken into account. The Board has relied on the decision in Inland Revenue Commissioners v. Clay, in support of the the said view. In that case the property was valued for the purpose of increment value duty under section 25 of the English Finance Act of 1910 which provided that the gross value of the property shall be the amount if sold at the time in the open market by a willing seller in its then condition it might be expected to realise. The property however, adjoined nurses' home, the trustees of which desired to purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the basis for valuing the shares in joint stock companies and securities issued by the Government : " Shares in joint stock companies and securities issued by Government or local authorities which are the subject of dealings in a recognised stock exchange may be valued on the basis of the closing price quoted on the stock exchange on the valuation date. For this purpose, if an assessee is assessed within a State in which there is a recognised stock exchange, the price quoted on that exchange may be taken into account. However, if there is no recognised stock exchange in the State in which the assessee is assessed, the price quoted on the recognised stock exchange located in a State nearest to the State in which the assessee is assessed may be adopted. " Though that circular has been issued under the Wealth-tax Act and has nothing to do with the valuation of the shares under the Estate Duty Act, still the fact remains that the revenue normally values the shares by finding out the market quotation in the stock exchange for the relevant shares. We do not, however, say that in all cases the market quotation should form the only basis of valuation. As we have already stated, if ..... X X X X Extracts X X X X X X X X Extracts X X X X
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