9911796707
TMI Blog1986 (8) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... see is a HUF. The assessment year is 1983-84 and the relevant previous year is Samvat year 2038. 3. Under an indenture dated 18-3-1982, Shri Shrenik Kasturbhai, as the karta of the assessee, settled in a trust Rs. 500 for the benefit of Master Punit Sanjay Lalbhai. The said trust was not revocable for a period of 73 months. During the relevant previous year, the assessee had, inter alia, gifted the following shares of public limited companies to the said trust: Name of the company No. of shares (1) Arvind Mills 48 (2) Atul Products 663 (3) Raipur Mfg. Co. 1509 (4) Anil Starch Products 38 4. On the aforesaid facts, the assessee filed its gift-tax return declaring the value of gift at Rs. 1,15,084 in respect of the aforesaid shares. During the course of the assessment proceedings, vide its letter dated 15-12-1984, the assessee supported the value of gifted shares estimated by it at Rs. 1,15,084, in the following manner: "This has reference to today's hearing of the above case. We furnish herewith copy of the trust deed of Shrenik Kasturbhai Revocable, Trust, a revocable trust created by the assessee. Section 6(2) of the Gift-tax Act, 1958 provides for valuation of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st rates of Government loans and securities and the return on shares of companies (known as blue chips) which are very low, have also to be kept in mind. 4. The assessee has declared the value of gifted shares at the rate of 1.5 per cent at Rs. 1,15,084. As per the rate of 4 per cent prescribed by rule 11 of the Gift-tax Rules, the value of gifted shares works out to Rs. 2,10,383." 6. Being aggrieved by the order of the GTO, the assessee went up in appeal before the Commissioner (Appeals) with the following grounds : "1. (a) The Gift-tax Officer erred in adopting the discounting rate of 4 per cent per annum instead of rate of 15 per cent for the purpose of finding out the capitalised value of the income under sub-section (2) of section 6 of the Gift-tax Act, 1958 read with rule 11 of the Gift-tax Rules, 1958. (b) The Gift-tax Officer failed to appreciate that the rule which prescribes the rate of capitalisation at 4 per cent was enacted when the bank rate was as low as 4 per cent and that rule 1BB of the Wealth-tax Rules, 1957 which became operative from 1-4-1979 recognises the captalisation rate as high as 12 per cent." It was urged on behalf of the assessee that rule 11 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annum. In this particular case, the gift is not revocable for a period of 6 years. It does not mean that immediately on the expiry of the period of 6 years, the gift will be revoked. In fact it may or it may never be revoked even after the period of 6 years. Taking into consideration this fact I am of the opinion that the rate of capitalisation of 4 per cent must have been fixed by the rule-framing authorities. Therefore, I am of the opinion that the Gift-tax Officer was correct in adopting the discounting rate of 4 per cent per annum instead of the rate of 15 per cent as desired by the learned representative of the appellant. In any case, the Gift-tax Rules prescribe the rate of discounting at 4 per cent per annum for the purpose of arriving at the capitalised value of the income from the property gifted for the purpose of valuing the gift according to Gift-tax Rules, 1958. The valuation made by the Gift-tax Officer of the gifted shares is, therefore, upheld and the appeal is dismissed." 8. Being aggrieved by the order of the Commissioner (Appeals), the assessee has come up in appeal before the Tribunal. Apart from reiterating the submissions which were made before the gift-tax a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, the learned counsel for the assessee went on to argue that in the instant case, one need not go to the rule with a view to finding out the value of the shares gifted by the assessee. In support of his submissions, the learned counsel for the assessee referred to the decisions in the cases of CIT v. Shri Krishen Chand Charitable Trust [1975] 98 ITR 387 (J. & K.), Second ITO v. M.C.T. Trust [1976] 102 ITR 138 (Mad.) and CIT v. Shree Padmanabhaswami Temple Trust [1979] 120 ITR 42 (Ker.). 10. The learned counsel for the assessee further stated that rule 11 was introduced by Notification No. GSR 491, dated 16-3-1963. Since at that time the rate of interest prevalent was 4 per cent discounting rate of 4 per cent per annum was quite in order. However, in 1982, the rate of interest of advance tax under the 1961 Act, was raised from 4 per cent to 12 per cent and in 1984, it was further raised to 15 per cent. Similarly, the bank rate which was 4 per cent in 1963 was raised to 10 per cent in 1982 and further raised to 11 per cent in 1984. However, in the said rule, the discounting rate remained at 4 per cent per annum all through even till today. He, therefore, urged that keeping in mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med it fit to raise the rate of discounting under the 1958 Act even though the rates were increased under the 1961 Act, and there was increase in the bank rate also. According to him, we should presume that the Parliament was aware of the different rates mentioned in different direct taxes statutes and in fact, the Parliament wanted so. He also pointed out that whenever an assessee gets benefit under the prescribed rules, he urges that the rules are of mandatory nature. As for example in case of rule 1BB of the Wealth-tax Rules, 1957. However, when the provisions of the rules are adversely affecting him, be invariably urges that rules are of directory in nature and not mandatory. This attitude of blowing hot and cold has to be avoided in construing the provisions of a statute and the rules made thereunder. He, therefore, urged that on the harmonious construction of the provisions of section 6, read with rule 11, the only conclusion one can arrive at is that while valuing the shares in question, the rate of discounting of 4 per cent as prescribed under the rule is the only rate which can be applied. In this view of the matter, he contended that we should uphold the action of the gif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of the said rule are redundant. We make this observation as the learned representative for the department had very forcefully contended that in order to decide the point at issue in view of the provisions of section 46(1) and 46(2)(a), we have to harmonise the provisions of section 6(2) with that of rule 11 even though the expression 'in the prescribed manner' is not mentioned in sub-section (2) of section 6. 14. At this stage, it would be necessary to advert to section 46 and rule 11. The relevant portion of section 46 reads as under : "(1) The Board may, by notification in the Official Gazette, make rules for carrying out the purposes of this Act. (2) In particular, and without prejudice to the generality of the foregoing power, rules made under this section may provide for--- (a) the manner in which the value of any property may be determined; (4) The Central Government shall cause every rule made under this Act to be laid as soon as may be after it is made before each House of Parliament while it is in session for a total period of thirty days which may be comprised in one session or in two (or more) successive sessions, and if, before the expiry of the sess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Parliament, that such substitution could be made in the said rule. In fact, on the proper appreciation of the assessee's case, it gives us an impression that the assessee has a grievance of such a magnitude which could only be cured by appropriate amendment in the said rule by an authority other than an appellate authority like the Tribunal. 17. We have carefully gone through various reported decisions cited on behalf of the assessee. However, in our view, none of the decisions could be pressed into service in order to decide the point at issue. Therefore, we do not deem it fit to discuss any of these decisions in this order. 18. For the aforesaid reasons, we do not find any infirmity in the action of the gift-tax authorities. In this view of the matter, we have no hesitation in upholding the order of the Commissioner (Appeals). 19. Before we part with this order, we would like to mention that both the learned counsel for the assessee as well as the learned representative for the department have placed their respective stands very forcefully. In fact, the learned representative for the department has very ably supported the action of the gift-tax authorities by highlighting ..... X X X X Extracts X X X X X X X X Extracts X X X X
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