TMI Blog1998 (1) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... in the light of the decision of the Supreme Court in the case of CGT v. Smt. Kusumben D. Mahadevia [1980] 122 ITR 38/3 Taxman 16 and that of the Gujarat High Court in CGT v. Executors and Trustees of the Estate of Late Shri Ambalal Sarabhai [1988] 170 ITR 144/36 Taxman 162A (SC). Against this decision, the revenue has come in appeal. 2. The learned DR Shri S.K. Srivastava relying heavily on the decision of the Honourable SC in the case of Bharat Hari Singhania v. CWT [1994] 207 ITR 1/73 Taxman 3 submitted that as Rule 1D has been held to be mandatory in its application unquoted equity shares have to be valued as per the aforesaid Rule. On this decision alone, the order of the CGT needs to be set aside. 3. The learned AR, Shri B.B. Ahuja on the other hand argued that the assessee's case has to be examined under the provisions of Gift-tax Act which are not pari materia with those of the Wealth-tax Act. There are direct decision on the issue namely, Smt. Kusumben D. Mahadevia's case and that of the Gujarat High Court in the case of Chimanbhai Kashibhai Patel v. CGT [1993] 203 ITR 57. The issue has to be decided in the light of the same. On the other hand, in the case of Bharat Har ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as it stood then, reads as under:--- "10.(2) Where the Articles of Association of a Private Company contain restrictive provision as to the alienation of shares, the value of the shares, if not ascertainable by reference to the value of the total assets of the company, shall be estimated to be what they would fetch if on the date of gift they could be sold in the open market on the terms of the purchaser being entitled to be registered as holder subject to the articles, but the fact that a special buyer would for his own special reasons give a higher price than the price in the open market shall be disregarded." On comparison of Rules made under the Wealth-tax Act and Gift-tax Act, it is seen that Wealth-tax Rules are more comprehensive. Separate modes of computation have been provided for in respect of most of the assets. While Rule 1B lays down the mode of valuation of life interest, Rule 1BB specifies the mode for valuation of house. Similarly Rule 1C provides for computation of value of preference shares. The computation of other assets have also been provided for in Rule 2 onwards. The manner in which the market value of a particular asset is to be worked out is given in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e there is a Rule prescribing manner in which a particular property has to be valued, the authorities under the Act have to follow it." On the other hand, the decision in the case of CWT v. Mahadeo Jalan [1972] 86 ITR 621 (SC) was distinguished on the ground that for the relevant period of time, the opening words "subject to any rules made in this behalf" were not there. As regards the decision in Smt. Kusumben D. Mahadevia's case, their Lordships found that in that case the Court was concerned with the valuation of shares in an investment company which was a going concern. Reference was also made to the decision of the Supreme Court in Executors and Trustees of the Estate of Late Shri Ambalal Sarabhai's case. It was held that in the aforesaid case, the question related to valuation of certain shares which were subject matter of a gift. 7. From the above, it is clear that no hard and fast rule can be laid down for valuation of unquoted equity shares. It would depend on the facts and circumstances of each case, the nature of the business, the prospects of profitability and such other consideration which may be found to be applicable to the facts of each case. This however would no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer, an intermediate figure may have to be computed by adjustment of unreasonable expenses and adopting a reasonable proportion of the profits. 3. In the case of a private company also where the expenses are incurred out of all proportion to the commercial venture, they will be added back to the profits of the company in computing the yield. 4. Where the dividend yield and earning method break down by reason of the company's inability to earn profits and declare dividends, if the set back is temporary then it is perhaps possible to take the estimate of the value of the shares before set back and discount it by a percentage corresponding to the proportionate fall in the price of quoted shares of companies which have suffered similar reverses. 5. Where the company is ripe for winding up then the break-up value determines what would be realised by that process. 6. Valuation by reference to the assets would be justified where the fluctuations of profits and uncertainty of conditions at the date of the valuation prevent any reasonable estimation of prospective profits and dividends. These are not, however, hard and fast rules. But, the market value, except in exceptional cases ..... X X X X Extracts X X X X X X X X Extracts X X X X
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