TMI Blog1994 (1) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that the grounds on which notice under section 16(1) of the Gift-tax Act was issued were not fully settled and the issue of notice was invalid ? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the shares in Messrs. M. P. Udyog Ltd., were to be valued on yield basis and the ratio laid down by the Supreme Court in CGT v. Smt. Kusumben D. Mahadevia [1980] 122 ITR 38, was applicable ? 3. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the share should have been valued on the basis of the last balance-sheet of the company drawn up prior to the date of gift and the ratio laid down in CGT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic are not substantially interested and its shares were not listed in any stock exchange. The Gift-tax Officer was of the view that as the shares were not quoted in the stock exchange, their value was to be determined on the average of the break-up value indicated by the balance-sheet of the company in terms of rule 1D of the Wealth-tax Rules/10(2) of the Gift-tax Rules read with section 6(3) of the Act. As the transaction of sale was made during the currency of the previous year relevant to the assessment year in question and in order to determine the intrinsic worth of the shares as on May 29, 1985, the date of the transaction, the Gift-tax Officer adopted the balance-sheet of the company drawn up on July 31, 1985, being in proximity with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drawn up subsequent to the date of sale was illegal, unjust and improper because as on the date of transaction the balance-sheet of the company as on July 3, 1984, alone was available to the prospective buyers. The shareholders become aware of profits made by the company only when the profit and loss account is published. Further, where the value of the shares would depend on the profits earned by a company, the information which the shareholders can get at any point of time, would be only of figures in respect of such profits earned as on the last date of the year which has been completed and not as on the last date of the year which is yet to close. For the aforesaid view the Income-tax Appellate Tribunal placed reliance on a decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen necessarily the second balance-sheet would afford a better guide for the break-up value to be arrived at than the more distant balance-sheet of the earlier date. In CWT v. S. Ram [1984] 147 ITR 278, the Madras High Court has expressed yet another view on the questions under reference. It was held : "In the absence of the facility of drawing up a balance-sheet precisely on the date of the gift, the next best thing, both for the assessee who is the holder of the unquoted shares and the Department, which is charged with the duty of evaluating the market value of the shares, not to speak of the company itself, is to take the balance-sheets falling both before and after the date of the gift and arrive, as near as may be, at the break up va ..... X X X X Extracts X X X X X X X X Extracts X X X X
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