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TMI Blog1985 (9) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... s to capitalise the rent. The assessee's valuer Shri L.C. Malhotra by report dt. 30th April 1975 (PB, 1-9) valued the property by rent capitalisation method at Rs. 2,33,333 by capitalising the net rent @ 9 per cent after noting that the gross rent was of Rs. 30,000 per annum out of which he had allowed 30 per cent as outgoing for ground rent, municipal taxes, repairs and insurance. Valuation officer's report under WT Act has not been made available to us and we do not know what were the actual outgoings for ground rent, municiple taxes, etc. 3. Deceased was Karta of an HUF which owned residential flat No. 11 in Noamandie in Carmicheal Road, Bombay, Accountable person valued it at Rs. 1,63,546 while ACED after noting take the said flat was valued at Rs. 3,65,520 in wealth-tax for asst. yr. 1975-76 (valuation date 31st March 1975) valued it at 10 per cent less than the said wealth-tax valuation at Rs. 3,28,968. 4. Appellate Controller however vide para 9 confirmed the said valuation. Accountable person, however, urges, on the basis of Jehangir Mohd Ali Chagla Anr. vs. M.V. Subrahamanian, Addl. First Asstt. Controller of Estate Duty (1985) 45 CTR (Bom) 180 : (1985) 155 ITR 637 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the said provision of aggregation of lineal descendants' share in the estate of the deceased under s. 34 ED Act infringed Art. 14 of Constitution of India. However, the said provision has been held to be constitutionally valid by a number of High Courts, namely, N. Krishna Prasad vs. ACED (1972) 86 ITR 332 (AP), Komandur Soshmma vs. Appellate CED (1973) 88 ITR 82 (AP), Komaraju, N.V. vs. Govt. Of India (1974) 97 ITR (AP), Jaysankar, T.R. vs. ACED (1972) 83 ITR 445 (Ker), Badri Vishal Tandon vs. ACED (1976) 103 ITR 468 (All), Hari Ram vs. ACED 1975 CTR (P H) 163 : (1975) 101 ITR 539 (P H), CED vs. Sant Ram (1981) 20 CTR (MP) 48: (1981) 130 ITR 38 (MP), Remeshwar Lal Agarwal vs. Union of India and Ors. (1982) 133 ITR 545 (Pat), P.L.S. RM. Ramanathan Chettiar vs. Asstt. CED (1970) 76 ITR 402 (Mad). Under these circumstances, we uphold the constitutional validity of the said provision of aggregation under s. 34 and confirm the order of Appellate Controller on this point. 9. The ld. Counsel for the accountable person, however, urged that even for aggregation under s. 34, the deceased's son's share was not 1/3rd as was worked out by ACED considering that the family consisted of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellate Controller's order deleting the said asset. 14. The last controversy before us is regarding the valuation of 27,298 shares owned by deceased in Capsulation Services P. Ltd. of face value of Rs. 10 each. The said company's accounting year ends on 30th September, ACED following CED vs. J. Krishnamurthy (1974) 96 ITR 87 (Mys), held that the shares were to be valued under r. 1D of WT Rules r/w. s. 37 of ED Act. He accordingly valued the said shares @ Rs. 26.15 per share. ACED, for this purpose, considered the balance sheet of 30th Sept., 1974 which was one after death of the deceased on 24th Aug., 1974. 15. Appellate Controller upheld the application of r. 1D of WT Rules. 16. At the hearing before us the ld. Counsel for the accountable person urged that the said shares should not have been valued under r. 1D and should have been valued on yield basis as was held in CWT vs. Mahadev Jalan Ors. 1972 CTR (SC) 395 : (1972) 86 ITR 621 (SC). It was urged that the guidelines laid down by Supreme Court in that case were regarding the method of valuation and the Supreme Court had observed that the yield method or profit earning method is the correct method and break up method s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant year, the WTO can on an examination of the balance-sheet, ascertain the profit-earning capacity of the concern and on the basis of the potential yield fix the valuation. (1972) 86 ITR 629. Applying the said test to the facts before us in respect of the financial position of M/s. Cepsulation Services P. Ltd., we note from the report of Dalal Desai Kumana Chartered Accountants, dt. 22nd May, 1982 (PB. 19-33), that the said company had equity shares of Rs. 14,11,200 in the year 1970-73 when the reserves and surplus of the company rose from Rs. 25.14 lac to Rs. 35.79 lakhs and similarly the shareholders' funds rose from Rs. 39.25 lakhs in 1970 to Rs. 49.71 lakhs in 1973. In 1974, bonus shares in the ratio of 1: 1 were issued and while the equity capital went up to Rs. 28,22,400, the reserves and surplus even after transfer to bonus shares, stood at Rs. 26.07 lakhs and the shareholders' fund rose to Rs. 54.29 lakhs. The profit after tax and development rebate ranged about Rs. 5.30 lakhs from 1970 to 1974 which was around 35 per cent of the share capital up to 1973 and less that 20 per cent of the increased equity in 1974. However, the dividend from 1970 to 1973 was only @ 15 per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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