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TMI Blog1993 (10) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act, 1958, does not indicate that market value of shares gifted is to be determined with reference to rule 1D of the Wealth-tax rules, 1957, and in that view cancelling the order of the Commissioner of Gift-tax under section 24(2) of the Gift-tax Act, 1958 ?" Shortly stated, the facts leading to this reference are as follows: The Gift-tax proceedings were initiated by the Gift-tax Officer in the hands of the assessee for the assessment year in question as the Gift-tax Officer was of the opinion that the gifts chargeable to tax had escaped assessment. The facts relating to the initiation of proceedings under section 24 of the Gift-tax Act, 1958, were that Sri Madanlal Patodia and Sri Brijilal Patodia (now deceased) gifted 1,000 and 800 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Rs. 633.44 for wealth-tax, the Gift-tax Officer should have taken that as the value of each of the gifted shares. He, therefore, set aside the assessment. Being aggrieved, the assessee filed an appeal before the Tribunal against the order of the Commissioner of Gift-tax passed under section 24 of the Gift-tax Act. The Tribunal was of opinion that the order passed by the Gift-tax Officer was not erroneous and prejudicial to the interests of the Revenue, Hence, the Tribunal cancelled the order of the Commissioner of Gift-tax and restored that of the Gift-tax Officer. It has been pointed out in the order under section 24(2) that both the assessees disclosed the break-up value of the shares at Rs. 633.44 per share as on the valuation date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d company which is a going concern and which is not ripe for liquidation can only be arrived at under the provisions of section 6(1) of the Gift-tax Act on the basis of the profit-earning. It is thus contended by learned counsel for the assessee that it is not in dispute that the company of which the unquoted equity shares have been valued is a going concern. It is not the case of the Revenue that the company is ripe for liquidation and, therefore, the yield method of valuation is not appropriate. So, in his submission, the decision of the Supreme Court in Kusumben D. Mahadevia [1980] 122 ITR 38, has to hold the field. It is urged on behalf of the Revenue that the Supreme Court in Kusumben D. Mahadevia's case [1980] 122 ITR 38, did not go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference to the assets. Therefore, the adoption of any alternative method does not arise. We find substance in the contention of the Revenue. It also accords with the view we have taken in CWT v. India Exchange Traders' Association [1992] 197 ITR 356 (Cal). It has been pointed out by us in the said decision that the Supreme Court declined to consider the effect of inalienability of shares of a company and its impact, where restrictive provisions are contained in the articles of association, as that was not a question urged before the Tribunal or the High Court. Therefore, the effect of rule 10(2) in a case where transfer of shares is restricted by the articles had no occasion to be considered by the Supreme Court. The Supreme Court decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular case. But the question of impracticability does not appear from the facts of the case. Moreover, we also observe the fact that the subsequent amendment to the Gift-tax Act has supplanted rule 10(2) by Schedule II to the Act itself where it has been expressly said that the same method of valuation should apply to an asset for the purpose of gift-tax as prescribed by the Wealth-tax Act. Schedule III to the Wealth-tax Act in turn has incorporated in the Act the same method of valuation what has been rule 1D. Rule 1D also stands supplanted. By incorporating the rules in the enactment, the Legislature has clearly shown its intention to be, from the very beginning, that the break-up value method should be followed in the valuation of unquot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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