9911796707
TMI Blog1987 (1) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... n of shares of Devidayal Stainless Steel Inds. (P.) Ltd. The WTO had valued the shares under rule 1D while the Commissioner (Appeals), in the appeals, held that they should be valued on yield basis. The revenue is objecting to the same. 3. The question of valuation of shares of companies is amply explained by the Supreme Court in the decisions rendered in the case of CWT v. Mahadeo Jalan [1972] 86 ITR 621 and CGT v. Smt. Kusumben D. Mahadevia [1980] 122 ITR 38. We have also the decision of the Bombay High Court in the case of Smt. Kusumben D. Mahadevia v. N. C. Upadhya [1980] 124 ITR 799. Normally the shares are to be valued on yield basis unless, in exceptional cases, break-up method can be adopted. We see no such special circumstances t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of unreasonable expenditure and in a such a case, the figures would have to be adjusted in order to arrive at the real profit-earning capacity of the company". The Supreme Court has in the case of Vazir Sultan Tobacco Co. Ltd. v. CIT [1981] 132 ITR 559 pointed out that if a provision for a known or existing liability is made in excess of the amount that would be reasonably necessary for the purpose, the excess should be treated as a reserve. Their Lordships have also pointed out that "provision is charged against profits to be taken into account against gross receipts in the profits and loss account while a reserve is an appropriation of profits". As we presently point out, while taking up other items, a reserve is not eligible fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated on account of statutory obligation. The amount transferred to reserve is derived from the profits and it forms part of the assets of the company. May be for the purpose of distribution of profits to the sharesholders, it may not be available. Still, the amount transferred to reserve is the direct result of the business conducted by the company. It may be that the company is placed under restrictions to utilise that asset but such restriction is only temporary. In due course, that amount would be available to the company for its utilisation. We, therefore, hold that the amount transferred to statutory development reserve created by the company is not eligible for deduction. 8. The next item is donations. It was claimed by Shri Haribha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The revenue's objection is, therefore, rejected. 10. The last ground is about the rate for the purpose of capitalisation. The Commissioner (Appeals) adopted 15 per cent as the rate of yield. The impugned order refers to the decision of the Gujarat High Court in the case of CIT v. Smt. Vimlaben Bhagwandas Patel [1979] 118 ITR 134. The learned departmental representative urged that the rate of yield for the purpose of capitalisation, capitalisation should be 10 per cent. The WTO had submitted before the Commissioner (Appeals) that 9 per cent should be adopted. It was argued on behalf of the revenue that the Gujarat High Court decision was in connection with acquisition of an immovable property and that the same should not be taken as a b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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