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2005 (9) TMI 229 - AT - Income TaxComputation of capital Gains - Determine the fair market value of the unquoted shares - Method of calculation of the cost of acquisition - original shares - HELD THAT:- The method of determination of market value of unquoted shares was examined by the Lordships of the Apex Court have examined this issue in the light of earlier judgments of the Apex Court in the cases of Mahadeo Jalan [1972 (9) TMI 7 - SUPREME COURT] and Smt. Kusumben D. Mahadevia [1979 (12) TMI 61 - SUPREME COURT], CGT v. Executors & Trustees of the Estate late Shri Ambalal Sarabhai [1987 (12) TMI 31 - SUPREME COURT]. Their Lordships have categorically held that rule 1D has necessarily to be followed and WTO has no option either to follow or not to follow the same and the question whether the Rule is mandatory or directory does not arise. While dealing with the other methods of valuation of unquoted shares their Lordships have out rightly discarded the arguments of the assessee that the break up method adopted by rule 1D does not lead to proper determination of the market value of the unquoted shares. They further held that the argument to this effect advanced by the learned counsel for the assessee is based upon the assumption and premises that the value determined by applying the yield method is the correct market value. Their Lordship have further held that once rule 1D is brought on the statute it is to be followed in each and every case as the rule is found to be good and valid. It is not a matter of choice or option. The Rule making authority has prescribed only one method for valuing the unquoted equity shares. If these methods were not to be followed, there is no other method prescribed by the Rules. Their Lordships have further held that if the contention of the assessee are accepted then it would be open to the WTO to adopt such other method of valuation as he thinks appropriate in the circumstances. This is bound to lead to vesting of uncalled for the wide discretion in the hands of the WTO/valuing authorities. It would lead to uncertainty and may be arbitrariness in practice. Where there is a Rule prescribing the manner in which a particular property has to be valued, the authorities under the Act have to follow it. They cannot devise their own ways and means for valuing the assets. Their Lordships further explained that rule 1D does not treat the break up value as the market value. A deduction of 15 per cent is to be made in the break up value to arrive the market value. Their Lordships further examined the various principles enunciated in the judgments of Mahadeo Jalan's case and Smt. Kusumben D. Mahadevia's case by the Apex Court. While dealing with the issues their Lordships of the Apex Court in the case of Bharat Hari Singhania [1994 (2) TMI 55 - SUPREME COURT] have categorically examined the dividend yield method, the earning method and the break up method and finally concluded that the earning method and dividend yield method is a cumbersome process and the best method is the break up method as laid down in rule 1D. We are also not convinced with the argument of the assessee that the ratio laid down in the case of Bharat Hari Singhania is not applicable to the present case as it was rendered in wealth tax matter, because, whatever cases are referred before us they all were rendered in different Acts. We, therefore, have to follow the latest judgment which is more rational in order to adjudicate the impugned issue. We, therefore, of the view in the light of the categorical finding of the Apex Court, that the unquoted shares in the instant case should have been valued as per break up method, as done by the Assessing Officer. We, therefore, do not agree with the finding of the CIT(A). Accordingly, we, set aside the order of CIT(A) and restore that of the Assessing Officer. In the result, appeal of the revenue is allowed.
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