9911796707
TMI Blog1986 (8) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... -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. 1,15,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and and valued the gifted shares at Rs. 2,10,383, with the following observations: "3. The assessee's contentions cannot be accepted in view of the mandatory provisions of rule 11 of the Gift-tax Rules. Moreover, for considering the reasonableness of the prescribed rate of interest, interest 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for which the gift is not revocable and the average of the income received from the property during the 3 years or such lesser period of complete years in which such property was in existence, preceding the previous year for the year of assessment after discounting it at the rate of 4 per cent per 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined in sub-section (2). In fact, according to the learned counsel for the assessee, rule 11 is 'intruder', 'trespasser', 'uninvited' inasmuch as it amends the provisions of sub-section (2). 9. Even assuming for the sake of argument that one has to harmonise the provisions of sub-section (2) and rule 11, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitle the assessee to urge that rate of discounting mentioned in the said rule should be varied. On the contrary, according to the learned representative for the department, this aspect supports the stand of the revenue inasmuch as the rule-making authority with the sanction of the Parliament, has not deemed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from the assessment stage, that it is not in dispute that the provisions of section 6(2) are clearly attracted in its case. Again, it cannot be disputed that one cannot totally ignore the provisions of rule 11 even though the learned counsel for the assessee, in the course of his argument, has stated that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not be adhered to. In other words, what the assessee is urging in this appeal is that the rate of discounting mentioned in rule 11 should be suitably substituted by a higher rate. We are unable to accept the stand taken by the assessee inasmuch as it is only for the rule-making authority, with the sanction of 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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