9911796707
TMI Blog1998 (11) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of the gift-tax ?" The respondent-assessee had made a gift of certain shares of private limited companies. The shares were not quoted on the stock exchange. As shares were of a private limited company, free transfer of which was prohibited under its memorandum of association and they were not quoted at the stock exchange to determine its price on the date of gift, the value of shares gifted was worked out at Rs. 31,000. The assessee claimed a deduction of 15% of such sum by inviting attention to rule 1D of the Wealth-tax Rules. The Income-tax Officer rejected the claim of the assessee for adjusting the value of shares gifted for the purpose of levying gift-tax. On appeal, the learned Appellate Assistant Commissioner agreed with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the asset, if sold on the date on which the gift was made. Sub-section (3) deals with determination of the value of such asset which is not saleable in the open market to be determined in the prescribed manner. Rule 10(2) which is relevant for our purposes deals with valuation of shares of private companies whose articles of association contain restrictive provisions as to the alienation of shares, if not ascertainable by reference to the value of total assets of the company is to be estimated to be what the same would fetch if on the date of gift could be sold in the open market on the terms of the purchaser being entitled to be registered as holder subject to articles. In terms it makes it clear that the fact that a special buyer for his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Obviously the estimated value as on that date of break up value, needs adjustment to make the estimate of value as on that date to be realistic, if the said method is to be adopted. One illustration is provided under the rules framed for valuing any asset as on the valuation date for the purpose of the Wealth-tax Act. Like section 6 of the Gift-tax Act, section 7 of the Wealth-tax Act too provides for the determination of the value of assets held by an assessee as on the valuation date. At the relevant time sub-section (1) of section 7 Which is pari materia with sub-section (1) of section 6 read : "7. Value of assets, how to be determined.---(1) Subject to any rules made in this behalf, the value of any asset, other than cash, for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Under rule 10 of the Gift-tax Rules it would be noticed that the term used is not that the value of the share shall be "the break up value" of shares as on the date of the gift but it only provides for "finding the value with reference to the total assets of the company". This clearly goes to show that under the rule too, break up value as such has not been prescribed to be the value of the gift as on the date for the purpose of levying tax, but, the break up value has only been provided as a foundation on the basis of which the value is to be determined by the Assessing Officer and where the Assessing Officer is not able to ascertain, then, he has to fall back on the open market price formula, by assuming that the shares are transferable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w the applicability of any provision or rule framed under the wealth-tax or for that matter in other statute to be applicable to proceedings under the Gift-tax Act a fortiori on their own force. However, in culling out the principle and guideline to be applied in framing assessments under the Gift-tax Act if there is no specific provision under the Act, the assessing authority can always look around for guidelines emerging for like situations under other statutes without surrendering to such statutes as a matter of course. We find from the order of the Tribunal that by relying on a decision of the Bombay Tribunal which has accepted the principle of deduction to be considered for the purpose of valuing the shares under rule 10(2). The refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xist. However the value the shares of a private limited company would fetch in the open market as ascertained disregarding the restrictions as to sale will have to be reduced because in reality the shares would not fetch that much of money when transferred because the shares in a private limited company are not easily transferable and hence cannot be treated to be on a par more or less with money that can be handed over quickly from one person to another or other commodities which are readily saleable." Apart from the above principle, we find from the statement of case as well as from the annexures appended thereto, it is nowhere to be found that value of shares at Rs. 31,000 has been worked out at the break up value. In the absence of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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