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TMI Blog1995 (10) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... 650 shares of the aforesaid company had been transferred by the assessee to his son for inadequate consideration. He accordingly invoked the provisions of section 4(1)(a) of the Act and applying the rate of Rs. 418 per share, worked out the value of the gifted shares at Rs. 2,71,700. Since these shares had been sold for a consideration of Rs. 65,000, the balance of Rs. 2,06,700 had been treated as deemed gift in the hands of the assessee. After allowing a basic exemption of Rs. 20,000, the Assessing Officer computed the taxable gift of Rs. 1,86,700. The learned first appellate authority confirmed the action of the Assessing Officer. 3. Though as many as six grounds have been taken in the appeal, Shri N.K. Sud, the learned Counsel for the assessee made the following submissions. 4. Shri Sud submitted that section 6 of the Gift-tax Act dealing with the method of determination of value of gifts was substituted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. It was submitted that prior to the amendment, the value of property other than cash, transferred by way of gift was estimated to be the price which, in the opinion of the Assessing Officer, it would fetch if sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was to take effect from a particular date, the Supreme Court held that the said provision was applicable from that very date. It was, therefore, explained that the amendment in section 4(1)(a) of the Act was made specifically w.e.f. 1-4-1992 and would apply only to assessment year 1992-93 onwards and not to prior years. The thrust of the argument was that if the amendment under section 4(1)(a) of the Act was merely clarificatory, then there was no need to carry out the amendment w.e.f. 1-4-1992. The first submission of the learned Counsel for the assessee, therefore was that the Revenue authorities were in error in applying the provisions of Schedule II to the Gift-tax Act for arriving at the value of the shares and thereby calculating the alleged inadequacy of the consideration. 6. The next submission of Shri Sud was that the amendment in section 4(1)(a) of the Act being substantive in character, it was incumbent upon the Assessing Officer to determine the fair market value of the shares transferred so as to arrive at the adequacy or inadequacy of consideration. It was submitted that apart from the fact that the assessee himself had shown the value of shares of the aforesaid com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee and that the gift assessed in the assessee's hands may be deleted. 10. The learned D.R. copiously referred to various portions of the impugned order and submitted that all the points raised by the learned Counsel for the assessee had been fully and squarely met by the learned CGT(A). The levy of gift-tax at the rate of Rs. 418 per share was strongly supported by the learned D.R. 11. We have carefully considered the submissions made before us. We have also carefully gone through the material on record. The first question to be decided is as to whether the amendment brought about by the Finance (No. 2) Act, 1991 in section 4(1)(a) w.e.f. 1-4-1992 is a procedural amendment or a substantive amendment. Before we develop this point further, it would be necessary to mention that ' gift ' has been defined in section 2(xii) of the Gift-tax Act to mean transfer by one person to another to any existing movable or immovable property made voluntarily and without consideration in money or money's worth and includes the transfer of any property deemed to be a gift under section 4 of the Gift-tax Act. It is, therefore, clear that the deemed gift comes well within the charging section wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law of procedure defines the modes and conditions of the application of the one to the other." 13. From the above definitions, it is clear that the method of valuation is a matter of procedure and not of substantive law. The Hon'ble Supreme Court in the case of CWT v. Sharvan Kumar Swarup & Sons [1994] 210 ITR 886 held that rule 1BB of the Wealth-tax Rules partook the character of a rule of evidence and was, therefore, a matter which fell within the realm of procedural law. 14. We have, therefore, no hesitation to say that the amendment brought about in section 4(1)(a) of the Act w.e.f. 1-4-1992 was procedural in character and did not affect the rights of the assessee because as held by the Supreme Court in the case of Sharvan Kumar Swarup & Sons, no suitor can be said to have a vested right in procedure. 15. The learned Counsel for the assessee has laid great stress on the Notes on Clauses and has also relied on the Supreme Court in the case of Patel Bros. & Co. Ltd. for the proposition that if a provision is made effective from a particular date, the law should be deemed to be applicable in respect of the amendment w.e.f. that date. In the case of Patel Bros. & Co. Ltd., the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a private limited company are not quoted at the Stock Exchange and there are no transfers of shares, then one has to go by the recognised method of valuation of such shares to arrive at their market value. In the present case, the assessee himself had arrived at the value of these shares as on 31-3-1990 for wealth-tax purposes at the rate of Rs. 418 per share. The Assessing Officer was justified in taking this to be the fair market value of the shares as on 28-2-1990 when the assessee transferred 650 shares to his son. 18. Much has been made by the learned Counsel for the assessee that as per the assessee's contention, the value of the shares of the aforesaid company on the basis of yield method was Rs. 92.90 per share and that the learned first appellate authority had not given an opportunity of hearing while working out the value of shares on that basis at Rs. 1,966 per share. We have gone through the working of the value of shares at Rs. 92.90 per share as per the yield method. This is discussed in para 4.4 of the impugned order. On the basis of the working given, the rate of return has been worked out at 11. 15% and taking the normal rate of return at 12%, the value of share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of advertisements showing that these shares had been advertised in the daily issue of the Tribunal. In addition to the above, the assessee had filed documents to show that he had surrendered these shares to the Estate Duty Officer to be sold in the open market and the price realised be apportioned towards estate duty. The Estate Duty Officer ultimately returned the shares as it was not possible even to realise the amount of Rs. 12 per share. On these facts, the Tribunal held that the department had failed to prove the fair market value of the shares at more than Rs. 12 per share. In the present case, however, as noted above, both the methods, namely, break-up method and the yield method, the value of the shares is considerable being Rs. 418 per share and Rs. 470 per share respectively. The initial onus which lay on the Assessing Officer stood duly discharged when it was demonstrated that the value of the transferred shares as per break-up method was Rs. 418 per share. Thereafter it was for the assessee to bring evidence on record to show that this was not so. No such evidence in the present case has been brought on record. 20. The Income-tax, Wealth-tax, Gift-tax and Estate Dut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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