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TMI Blog2010 (10) TMI 1218X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.10.1985 .She was a member share holder of the company. These shares were transferred to the assessee and thereafter she became member share holder. The shares of the company were in physical form only. The Assessing Officer further observed that in the return of income the assessee has shown the computation of long term capital gain as under :- "Statement of Long term Capital gain on sale of shares Details of shares sold Name of the company:- The Mysore Arts & Woods Works Co. Pvt. Ltd. No. of shares sold - 80 Nature of share sold - Ordinary shares. Name of buyers : Mr. Mohammed Sayeed Kadli Mrs. Sameena Abdul Kadli Date of Acquitsition No. of Shares 18/12/1956 Date of sales 10/01/05. Calculation of Capital gain: 80 1) Sale consideration 2) value as on 01/04/1981 698080 3550000 3) Indexed cost 3350784 Long term capital gain 199216 Less : Benefit under section 54EC of IT Act 500000 Nil Note : Benefit under section 54 EC In the F.Y. 2004-05 the assessee has purchased Bonds of Rural Electrification Corporation Ltd. on 24/03/05 50 Bonds @ 10000each. Total cost of bonds 500000. Therefore the assessee is entitled to benefit under section 54 E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. The assessee has taken the fair market value as per proper and scientific manner of calculating fair market value. This method is most proper and scientific. This is based on knowledge and science of valuation of shares of unquoted company. This is taken from books of accountancy as taught to the students of commerce and chartered accountancy. This method adopted in return of income (for valuation of the shares sold) is being followed by accountancy professionals and other experts and professionals every where. The company is the owner of the land and building. As on 01.04.81 the amount of fair market value of land and building is much higher to the amount of asset in the balance sheet. The difference in amounts of fair market value and the book value as per balance sheet of the company is too big and substantially high. Therefore, in the calculation of fair market value of the shares the value of land and building must be taken as per the report of the valuer. The assessee has already submitted a copy of the report of the valuer." The reliance was also placed in Smt. B. Subhadra vs. ITO (2005) 92 ITD 285(Hyd.) and Addl. CIT vs. Smt. Indirabai (1985) 151 ITR 692(AP). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal, the ld. CIT(A) while relying on the decisions relied on by the Assessing Officer has upheld the view taken by the Assessing Officer vide para-4.10 of his order which is extracted as under :- "4.10 …In view of the above, I am convinced that FMV of shares as on 01.04.1981 in the case of appellant would be ₹ 100 per share as calculated by Assessing Officer and not ₹ 8726 per share. It is beyond common parlance that a loss making company's share would be of ₹ 8726 per share as on 01.04.1981. One has to see the facts of each case while deciding the issue. One has also to see the reasonability and acceptability. Assets of Mysore Arts & Woods Works Pvt. Ltd. were of ₹ 64,780.82 as on 31.12.1981 and its liabilities were of ₹ 107808.27. Thus net surplus over liabilities was (-) ₹ 43,027/-. As per balance sheet of aforesaid company, value of shares would be minus. Since appellant's predecessor(mother-inlaw) purchased shares for ₹ 100 each, Assessing Officer adopted market value of 80 shares at ₹ 8,000/- and provided benefit of indexation. Assessing Officer is accurate and specific while making calculation of capital gain. He ado ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business of the Company was manufacturing of some wooden parts etc. The Company discontinued the business, because the company suffered continuous losses. To the best of information, the Company did not do any business from the year 1960 onwards. However, the Company was receiving rent income from some of the factory building, which were rented out, which after meeting the expenses resulted in losses. Refer the Statement of losses at page 191 of the Compilation. The sheds and the factory was on a vast strech of land admeasuring around 1,04,544, sq. ft., abutting well developed and fully developed commercial area. The entire property is in the commercial hub into a well developed area with good roads. 2. RE: RELIANCE ON WEALTH TAX ACT, 1957 A. Both enactments for different purposes and contexts - Rule 1D and Sec.55 (2) different purposes and contexts - Rule 1D was introduced for simplification, uniformly and to avoid controversy. {Ref: Circular No.559 dated 4.5.1990 at pages 188-9 of Compilation} - Rule 1D for arriving at "market value" and not "fair market value". B. Even otherwise, no blind reliance on the provisions of other allied Act in view of the following dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer was justified in valuing the fair market value of the unquoted shares as per Rule 1D of the Wealth tax Rules, therefore, the order passed by the Assessing Officer and confirmed by the ld. CIT(A) be upheld. 9. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the facts are not in dispute inasmuch as there is no dispute that the assessee has sold 80 shares of M/s. Mysore Arts & Woods Works Pvt. Ltd. on 10.1.2005 for a sale consideration of ₹ 35,50,000/-. Since the price of these shares are not quoted in the market, the assessee has valued the fair market value of these shares as on 1.4.1981 at ₹ 6,98,080/- and after indexation cost and benefit u/s.54EC of the Act, the assessee worked out the long term capital gain at Rs.Nil. The assessee has also filed net worth certificate of M/s. Mysore Arts & Woods Works Pvt. Ltd. showing the fair market value of share at ₹ 8,719/- per share as on 1.4.1981, appearing at page-6 of assessee's paper book. The Assessing Officer without rejecting the said net worth certificate of M/s. Mysore Arts & Wood Works Pvt. Ltd. issued by M/s. P. Shah & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was required to be taken and not some artificial value as per rules, which had no application. In the instant case, shares had been sold at the rate of ₹ 1,83,250 per share. That value had been accepted but if value of the shares sold on the date of sale as on 28.9.2000 was taken under the rule 1D, it was much less than the price received. Obviously, the price charged had not been worked out as per rule 1D. Therefore, it would not be legally fair or equitable to apply rule 1D for working out the cost of acquisition. One cannot have a different approach in fixing the price of same asset for a single purpose of computing capital gain. Further, written down value or value shown in the balance sheet was just a fraction of the value of main asset held by the company, i.e., cinema hall. If one would take only a fraction of the market value for computing value of share as on 1.4.1981, the value taken, could by no stretch of imagination, be said to be the fair market value of the asset. Obviously, one acts not only contrary to the statutory provisions, but also to advance injustice. Therefore, on facts and circumstances of the case, there was no justification for not taking the fai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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