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TMI Blog1985 (8) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... ries Ltd. The date of gift is 30-3-1975 as per the order of the AAC. In the return of gift the said shares were valued at Rs. 100 per share. According to the GTO since the shares are not quoted on any recognised stock exchange the value had to be arrived at on the basis of break-up value and for this purpose after giving necessary discount, etc., on the basis of balance sheet after certain adjustments the value was arrived at Rs. 233 and, accordingly, the assessment was completed under section 15(3) of the Gift-tax Act, 1958 ('the Act'). 2.1 In appeal before the AAC, a ground as per the statement of grounds, taken was that the value of the shares should be taken as nil as the same was required to be arrived at on the basis of yield as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt the question of valuation of shares was in respect of a private limited company being an investment company and not the public limited company, (ii) at the relevant time there was no provision in the Wealth-tax Act, 1957 ('the 1957 Act') specifically describing the method of valuation of unquoted shares, (iii) in the present case dividends were not declared in the initial years of the company engaged in the manufacturing activity and, therefore, the yield method was not the proper method or the only method of arriving at the value of the shares, (iv) the profitability of the investment in the shares of the company is clearly indicated from the accounts of 1975 when dividend of 16.8 per cent was declared as against that of 12 per cent in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entative relied upon the case of Shyamsukh Garg v. CED [1984] 145 ITR 238 (MP) under the Estate Duty Act, 1953 ('the 1953 Act') where CED v. J. Krishna Murthy [1974] 96 ITR 87 (Mys.) was followed. If rule 1D of the 1957 Rules is followed in the 1953 Act it was submitted why should it not be followed under the 1958 Act. Relying upon the case of CWT v. S. Ram [1984] 147 ITR 278 (Mad.) break-up value on the basis of two balance sheets was accepted. The law should be interpreted in workable manner. Reference was also made to the book by the learned author Sampat Iyengar's Law of Income-tax, Seventh edn., Vol. 2, at p. 1112 regarding decision of the Bombay High Court in the case of Seth Hemant Bhagubhai Mafatlal. 5. In reply, the learned counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he dividends do not correctly reflect the profit-earning capacity because of the factors mentioned the dividend method of valuation may be rejected and the valuation may be made by reference to the profits. The profit-earning method takes into account the profits which the company have been making and should be capable of making and the valuation according to this method, is based on average maintainable profits. It then further goes on regarding certain adjustments required to be made. Therefore, the plea of the assessee regarding applying the decision of the Supreme Court in the case of Smt. Kusumben D. Mahadevia is upheld. 6.1 But looking to the balance sheets, very first look gave an impression that the company made sizeable profits in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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